- USD & Treasuries recovered as Yields & Stocks (NASDAQ -1.54%) fell. US markets had their worst Quarter in 2 years.
- USOil slipped (–4%) & under $100 as President Biden confirmed releasing 180 mln barrels from US Strategic Reserve over the next 6-months & OPEC confirm no production increases.
- Yield curve extended it’s inversion.
Russia threatens Europe (again) “pay in Roubles or we’ll cut off the Gas”.
Core PCE: in-line at 0.4%, Weekly Claims missed at 202K vs 195k but still below normal levels, and Chicago PMI’s surprised significantly to the upside (62.9 vs 56.3) Asian markets traded cautiously following another weak US session, mixed data releases and an extension of the Shanghai lockdown.
Overnight – Chinese Caixin Manu. PMI’s sink in contraction for first time since 2020 – Manu. 48.1 vs. 50.4. AUD AIG Manu Index ticked higher & JPY Manu PMI (54.1 vs. 53.2) & Tankan Services PMI (9 vs. 5) both beat.
- USD (USDIndex 98.50). rallied from test of 97.70 yesterday.
- US Yields 10-yr closed at 2.32% , now back to 2.361%.
- Equities – USA500 -72.15 (1.57%) at 4530. US500 FUTS 4547. Banks & Technology stocks led the broadbased month end decline.
- USOil – Trades at $98.65 following Biden announcement. (Opened the week on Monday at 112.50.
- Gold – rallied to $1950 yesterday, before falling back to $1937 now.
- Bitcoin slips under the key 45K to trade at 44.7k now.
- FX markets – EURUSD back to 1.1055 now from 1.1170 yesterday. USDJPY holds at 122.40 now from 121.30 lows again yesterday as BOJ continue to defend JGB yield ceiling. Cable back to 1.3120 now.
European Open – The German 10-year rate is up 3.2 bp at 0.575%, alongside a 4.1 bp rise in the U.S. Treasury yield. However, while U.S. Treasury futures are moving higher, led by a 0.5% rise in the NASDAQ, DAX and FTSE 100 futures are down -0.1% and -0.05% respectively.
The uncertainty over what will happen to Russian gas exports to Europe is hanging over markets, amid fears that shortages will force producers to halt or throttle production. Germany’s Scholz tried to calm nerves over Putin’s announcement that payments will have to be made in Rubles, although whether Moscow’s proposal that payments in EUR will have to be paid into Gazprombank and then transferred into Rubles is a way forward remains to be seen. The war meanwhile drags on and while another round of video-talks between Ukraine and Russia are reportedly scheduled for today there is no sign of a breakthrough just yet. EZ inflation is going through the roof and today’s preliminary Eurozone HICP report is likely to look very ugly. ECB chief economist Lane has already laid the ground for an overshoot though, by turning dovish again and saying that the ECB must be ready to move in either direction in this situation.
Today – EZ, UK & US Final Manufacturing PMIs, US Labour Market Report, ISM Manufacturing PMI, China-EU Summit, Ukraine-Russia negotiators to meet again, Speech from Fed’s Evans.
Biggest FX Mover @ (07:30 GMT) USDJPY (+0.57%) Continues to rally off 121.30 lows this week. Next resistance 123.00. MAs aligned higher, MACD signal line & histogram higher & over 0 line, RSI 61 & rising, H1 ATR 0.211, Daily ATR 1.310.
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Stuart Cowell
Head Market Analyst
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