- Markets await inflation data for clues ahead of Fed response
- US Dollar, Treasuries rally
- Gold falters
Key Events
Despite the expectation that the Biden Administration’s spending plan will provoke a steep hike in inflation, futures on the S&P, NASDAQ and Russell 2000 were only moderately higher in trading on Tuesday, while Dow futures were marginally lower. European stocks were also trading in the green, slightly below record highs.
Bitcoin slid to a four-and-a-half month low.
Global Financial Affairs
The STOXX 600 Index climbed slightly with havens like utilities. Automakers dropped 0.8% after a six-day rally, which had driven the pan-European benchmark to a record high. German data revealed that Europe’s largest economy’s industrial output fell short of expectations, providing further evidence of supply bottlenecks and semiconductor shortages causing a slower than expected recovery in Europe’s steam engine economy.
Swiss drug maker Lonza (SIX:LONN) gained over 5%, taking the stock to an all-time high, after Goldman Sachs upgraded the stock to “buy,” while British American Tobacco (LON:BATS) rose as much as 2.5%, before paring the gain to 1.6%, after raising its annual revenue growth forecast.
Traders in Asia experienced a roller coaster as early gains reversed. China’s Shanghai Composite (-0.5%) underperformed, while Australia’s ASX 200 (+0.1%) provided the best results.
Focus was on yields, with the 10-year rate falling back below 1.6%, though it pared losses and settled at 1.57% as of the time of writing. All eyes are on the consumer-price data which potentially may influence the Fed’s decision on tapering its stimulus.
Yields may have provided a downside breakout to a symmetrical triangle. After their inability to traverse the 50 DMA, rates are struggling to remain abreast of the 100 DMA, before they fall back toward their uptrend line—at 1.25% where the 200 DMA guards—or even lower to 1.00%.
Taking its cue from Treasuries, the dollar advanced.
The greenback found support at the bottom of a rounding bottom, whose completion would indicate a return to the March highs, which were cut off with a bearish wedge. However, we have been arguing that the price decline from the March 2020 peak was in the shape of a bullish wedge. If we were right, the price should return to a medium-term uptrend. If the price falls below 89.00 we turn wholly bearish.
Gold wiped out yesterday’s gains on dollar strength.
Gold remains within a rising channel, after confirming support of the 200 DMA, which previously realigned with the top of a massive falling channel since the 2020 record top.
Bitcoin is falling for the fourth out of five days after former President Donald Trump—who thinks running for a House seat in 2022 is a "very interesting" idea—warned that Bitcoin is a “scam against the dollar.”
Bitcoin is still suffering from persistent tightening regulations in China and fell significantly after Tesla's (NASDAQ:TSLA) about-face in May on accepting the digital coin as payment for its cars.
Bitcoin extended the downside breakout of a bearish pennant, suggesting the crypto will retest the $30,000 level, challenging our recent bullish call.
Oil extended a decline, losing some momentum after hitting $70 a barrel in New York for the first time in over two years.
We consider the second-day decline is part of a return-move, before prices take off, having completed a bullish triangle.
Up Ahead
- The Bank of Canada announces its interest rate decision on Wednesday.
- Iran nuclear deal talks reconvene in Vienna on Thursday.
- Group of Seven (G7) leaders’ summit begins in Cornwall, England on Friday.
Market Moves
Stocks
- The STOXX 600 rose 0.1%
- Futures on the S&P 500 were little changed
- Futures on the NASDAQ 100 were little changed
- Futures on the Dow Jones Industrial Average fell 0.1%
- The MSCI Asia Pacific Index fell 0.2%
- The MSCI Emerging Markets Index fell 0.2%
Currencies
- The Dollar Index rose 0.2%
- The euro fell 0.1% to $1.2173
- The Japanese yen increased 0.2% to 109.44 per dollar
- The offshore yuan was up 0.2% at 6.39636 per dollar
- The British pound fell 0.3% to $1.4137
Bonds
- The yield on 10-year Treasuries was little changed at 1.56%
- Germany’s 10-year yield was little changed at -0.20%
- Britain’s 10-year yield was little changed at 0.80%
Commodities
- Brent crude fell 0.7% to $71 a barrel
- Spot gold fell 0.3% to $1,894 an ounce