- New Shanghai lockdown strikes an ominous note
- Treasury yields slip but remain above 3%
- Bitcoin recovers
Key Events
US futures on the Dow Jones, S&P 500, NASDAQ 100, and Russell 2000 were trading higher ahead of the New York open on Thursday. European stocks slid a quarter of a percentage point when markets opened there as traders await the ECB's interest rate decision which will be released today at 7:45 a.m. EST (1145 GMT).
Gold was weaker on dollar strength.
Global Financial Affairs
Earlier today, US contracts fell on news from Asia that Shanghai had announced a new coronavirus lockdown to begin on Saturday, after having eased some restrictions last week. The latest COVID restrictions upended recent bullish declarations that a global recession is less likely as supply chains are expected to return to normal.
However, futures have since recovered and are now pointing to a positive Wall Street open.
Meanwhile, the STOXX 600 Index fell for the third day, with consumer products and basic resources, but has rebounded from session lows.
Until now, traders were wagering that the ECB will raise rates 75 basis points by September, beginning with the first of three 0.25% increases in July. However, current pricing suggests traders now expect an extraordinary 50 basis point bump in September. Last week the Eurozone reported annual inflation was running at 8.1%, more than four times the central bank's 2% target. Australia's and Canada's rare 50 bps hikes underscore the view that the ECB may have to catch up with the global economy.
Most Asian indices closed in negative territory on Thursday, as a tech rally reinforced the opinion that the market may have bottomed. Australia's ASX 200 lost 1.42%, underperforming the region. Ironically, the sharpest interest rate increase from the RBA in 22 years caused a selloff that pushed the country's four largest lenders to multi-month lows. Although higher rates enable banks to increase their profit margins, growing concerns of a housing market crash, which would hurt bank profits, spooked investors there.
US stocks fell on Wednesday, ending a two-day rebound. The S&P 500 closed near the session bottom, and all sectors—excluding Energy which closed up 0.22%—declined. Matching up with Australia's housing scare, the S&P Real Estate dropped 2.4%, underperforming.
The S&P has been trapped in the same approximate 100-point range between 4075 and 4175 for almost two weeks. There is a technical reason for this churning.
The price has been struggling precisely on the neckline of a possible H&S top.
The NASDAQ 100 fell 0.8%, reversing a 0.5% gain, with chipmakers selling off after Intel's (NASDAQ:INTC) CFO warned shareholders that the upcoming quarter would fall short of management expectations, sending the stock down more than 5%, to its lowest since 2017.
The stock price registered a new low after completing a top.
Treasury yields on the 10-year note gave up some ground but maintained the 3.00% levels. The dollar rose for the second day, though it could not penetrate a resistance level.
The greenback is struggling for the second day to make new highs after Tuesday's Shooting Star—a candle presumed bearish after giving up session highs, disappointing the bulls which helped the index get there. Moreover, the Shooting Star underscored the support/resistance level going back to early May.
Gold dropped amid dollar strength, ending a two-day advance.
Short-term traders may take advantage of the yellow metal's price proximity to the bottom of its short-term Rising Channel, counting on a rebound to test the $1,871.60 resistance, where the price found a ceiling three times since May 10, before testing the Channel's top.
Bitcoin edged higher after a two-day decline.
The cryptocurrency remains trapped within a range we presume is bearish, after the initial plunge and within the larger bearish picture.
Oil was little changed, remaining around its record high due to ongoing robust demand.
Up Ahead
- US CPI figures are published on Thursday
- On Friday, University of Michigan consumer sentiment index is published on Friday
- Canada releases its employment figures on Friday
Market Moves
Stocks
- The MSCI Asia Pacific Index fell 0.4%
- The MSCI Emerging Markets Index fell 0.3%
Currencies
- The Japanese yen fell 0.75% to 133.24 per dollar
- The offshore yuan fell 0.3% to 6.6769 per dollar
- The British pound fell 0.03% to $1.2536
Bonds
- Germany's 10-year yield declined one basis point to 1.34%
- Britain's 10-year yield advanced one basis point to 2.26%
Commodities
- Brent crude rose 0.02% to $123.60 a barrel
- Spot gold fell 0.2% to $1,848.81 an ounce