- European stocks recover
- China was the bright spot during the Asian session
- Gold slumped
- The Bank of England Governor, Andrew Bailey speaks on Thursday.
- US initial jobless claims are published on Thursday.
- On Thursday US GDP figures are released.
- The MSCI Asia Pacific Index rose 1.8%
- The MSCI Emerging Markets Index fell 2.5%
- The euro fell 0.2% to $1.0610
- The Japanese yen rose 0.5% to 127.89 per dollar
- Germany's 10-year yield rose two basis points to 0.82%
- Britain's 10-year yield increased two basis points to 1.83%
- Brent crude declined 0.52% to $105.5 a barrel
- Spot gold fell 0.5% to $1,895.58 an ounce
Key Events
On Wednesday futures on the Dow Jones, S&P 500, NASDAQ and Russell 2000 rallied after investors dumped tech shares during Tuesday's US session. European stocks also rebounded today after tumbling on the news that Russia has stopped gas exports to some European countries, including Bulgaria and Poland. The move also sent natural gas prices higher.
The US dollar advanced.
Global Financial Affairs
Despite European woes, US contracts were trading in positive territory, led by futures on the Dow.
In Europe, the STOXX 600 opened lower but recovered and moved into positive territory after a four-day selloff.
In addition to geopolitical concerns and the ramifications of disruption to a significant portion of the European gas supply, stocks on the continent initially followed Tuesday's sharp selloff on Wall Street, which was exacerbated by Alphabet (NASDAQ:GOOG) reporting a $1.5 billion decrease in quarterly profits after the US session closed yesterday, due to a slowdown in YouTube ad sales.
If bulls maintain control of the pan-European index and keep it at these levels, the trading pattern will have completed a bullish hammer. After achieving its medium-term top, the market may be primed for a buying dip.
However, if the selloff persists enough to suppress the price below its Mar. 7 low, the European index will be in a peak-trough downtrend. This is visible too via the bearish MA interplay pattern, in which each MA is below a longer one. The bearish MACD cross, following a negative divergence, warns that the price may test the previous low, foreboding a long-term reversal.
Earlier, trading in Asia was mixed as markets reacted to Moscow's announcement that it would cease supplying gas to countries that refused to pay in rubles. The announcement is an attempt by President Vladimir Putin to support the Russian currency which has slumped in value due to severe sanctions.
Ironically, despite the harsh lockdowns in Shanghai and Beijing, indices in China were the only ones in green with the CSI 300 closing up 2.94%. President Xi Jinping is understood to want GDP growth in China to outpace US growth rates, so yesterday there were reports that the world's second largest economy will increase infrastructure construction to boost domestic demand.
This news follows the PBoC pledging to support the Chinese economy. The Shanghai Composite surged 2.5% on an otherwise red day. Even Hong Kong's Hang Seng managed to move 0.06% higher.
On Tuesday, US shares dropped to their lowest in six weeks as hopes faded that earnings could offset a suddenly ultra-hawkish Fed. Contracts on the NASDAQ 100 sank another 1%, on top of the underlying gauge's 3.9% plunge during yesterday's session.
As well, in aftermarket trading on Tuesday, shares of Alphabet and Texas Instruments (NASDAQ:TXN) were sold off on disappointing corporate results.
The S&P 500 Index declined 2.8% after General Electric (NYSE:GE) sold off, triggered by weak guidance on future profit. Tesla (NASDAQ:TSLA) traders carved 12.25% off its stock value because of the dramatic news that Twitter (NYSE:TWTR) had approved the purchase by Elon Musk but that Musk plans to borrow $12.5 billion against his Tesla stock to make the deal.
Yields on the 10-year Treasury note rebounded for the first time in four days as demand from bond investors increased.
However, the yield is already below its recent and exaggerated uptrend line for a third day. Also, both the MACD and the RSI suggest another decline as traders resume buying bonds. After reaching our 3% target, yields are due for a correction before continuing higher.
The dollar resumed its advance for a fifth straight day, the 17th up-move out of 19 sessions. The greenback reached its highest level since Mar. 20, 2021. Another 0.2% rise will bring the USD to the highest levels since Jan. 3, 2017 and a further 0.75% push higher will take the currency to highs not seen since 2002.
The price of the buck is testing the neckline of an H&S bottom. If it follows through, its trajectory may test the 2001 peak, the highest level since 1985.
Gold has fallen on dollar strength, as well as on increased safe-haven competition from Treasuries.
The yellow metal is testing the bottom of a Symmetrical Triangle and the support of the November highs. The MACD and RSI paint a pessimistic picture of gold.
Although Bitcoin bounced off the bottom of a rising channel after finding resistance from a bearish flag, the cryptocurrency slid again.
If we are right in our view, the flag may be the market device that helps bears break the rising channel of the token which would then resume along the path laid out by the H&S top.
Oil was marginally higher amid rising tensions between Russia and Europe.
Technically, the price found resistance from the peak of a Symmetrical Triangle. The breakout will likely determine the direction of the next significant move.