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Enough Noise To Make Your Eardrums Bleed



A money changer holds Turkish lira banknotes next to U

By Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA

As readers may have noticed, I tend to take a “big picture” view of the equity markets. I do this because I am getting a bit older now and things like my hearing are precious to me, if only so that I can hear Mrs Halley “communicating” with me. This week is a classic case in point. I can’t imagine how many spreads the FOMO gnomes of New York (and other places) have crossed this week as stock markets have gyrated to a barrage of contradictory inputs. Ironically, it looks at this stage, as if the Nasdaq, S&P 500, and Dow Jones will all close roughly unchanged for the week as it closes.

The petrified tail-chasing we have seen this week as equity markets swing from “we’re all doomed, get me out,” to “I don’t want to miss the absolute bottom of the stock market, get me in” is perhaps indicative of the state of confusion out there. These sorts of periods of volatility usually happen before a big directional move. Markets are being buffeted by wars, inflation, slowdowns, overheating economies, supply chain disruptions, energy shortages and monetary policy moves etc. I know which way my money is placed, and I believe much of the gyrations are partly down to denial that after over a decade, the unlimited free money forever central bank QE spigot is being turned off around the world.

Overnight, it was Amazon and Apple’s turn to drive market direction, trampling over US GDP and PCE data. We’ll come back to that but turning to the double AAs, Amazon disappointed on earnings as it struggles with supply and cost increase issues and a cloudy outlook. Apple posted spectacular results, but in the ensuing press conference, warned of revenue hits from supply chain problems as well. Intel also released decent results but also warned of a challenging outlook. In extended trading, both Apple and Amazon stock was sold heavily, unwinding a part of the overnight recovery and pushing Nasdaq and S&P futures lower in Asia.

We should ignore equity markets and look elsewhere in the financial world for the true direction of travel I believe. Oil prices rallied overnight as reports emerged that previously reluctant Germany and Hungary were getting on board with a ban on Russian oil imports. Gold held support at $1880.00 an ounce and has moved back above $1900.00. In currency markets, the low yield forever Japanese Yen fell 2.0% while the greenback continued rallying versus both DM and EM currencies, notably the Yuan. Rather oddly, US bond yields hardly moved for the second day in a row, perhaps girding their belts for next week’s FOMC. The rest of the price action though, suggests markets are moving to batten down the hatches for more turbulence ahead. That said, I will take price moves in Europe and the US today with a huge grain of salt, as we are month-end with the ensuing institutional rebalancing flows. Keep your eye on the prize and wear earplugs if necessary.

Overnight, US Advanced GDP Growth for Q1 had a surprising fall of 1.40% QoQ. Meanwhile, Adv PCE Prices for Q1 rose by a more than expected 7.0% QoQ. Before you start looking up stagflation definitions again, the GDP numbers were heavily distorted by a build-up of inventories, distorting the import side of the equation. The production, export and consumption side buried in the number was very healthy. Q2 data should show a sharp rebound and the US economy remains robust. The key takeaway is that the data won’t detract the FOMC from a 0.50% rate hike next week. Tonight, we get actual US Personal Consumption and Expenditure, Core PCE Prices and the Employment Cost Index. All three have upside risks I believe, and robust data will be further ammunition for a hawkish FOMC next week.

In Asia today, we have had a few data releases already. South Korean Construction, Industrial Production and Retail Sales for March continued their softening trend. Blame it on a China slowdown/Covid-zero, or supply chain disruptions, but the direction of travel is slightly concerning. It won’t do the Won any favours and South Korean officials have threatened to intervene today if the Won falls too quickly. Philippines and Australian PPIs both rose by more than expected. That will weigh on the Peso and highlight s the growth versus inflation quandary much of Asia will have to deal with this year. The PPI data will heighten pressure on the Reserve Bank of Australia to start its hiking cycle with a 0.15% rise next week.

Singapore Bank Lending held steady once again, but its PPI release this afternoon also has upside risks, and with the MAS six-monthly tightening passed, the Singapore Dollar could come under pressure again. Germany, France, Italy and Spain release flash GDP Growth Rates for Q1, along with aggregated Eurozone flash GDP. There are downside risks for obvious reasons and with the ECB determined to stay dovish, the Euro could have a tough end to the week. There is also risk around energy companies breaking sanctions by opening Rouble natural gas accounts, and a potential EU ban on Russian oil now that Germany is on board with the idea.

Finally, we need to talk about holidays because there are lots of them. Thanks to the start of Eid Al Fitr and Labour Day, Singapore is on holiday until Wednesday and thus, so am I. Today, Japan is on holiday and Golden Week next week means they are away from Tuesday through Thursday. Most of the Muslim world, including Indonesia and Malaysia, will be away next week for Eid Al Fitr. China is away on Monday through Wednesday, and Hong Kong and the United Kingdom are off for Labour Day on Monday. Many regional Asian markets such as Thailand and South Korea also have holidays next week.

All of that adds up to one thing, some seriously reduced liquidity in financial markets in Asia next week, especially on Monday. China may be on holiday until Thursday, but they are releasing official and Caixin PMIs over the weekend, along with the South Korean Balance of Trade on Sunday. Add in a potentially volatile finish to the week by New York, and any weekend news developments, and with just Japan and Australia at their desks, the scene is set for some potentially ugly volatility on Monday, especially if the China PMI data is poor. Asia also releases a raft of PMIs on Monday as well. Did I mention FOMC, RBA and BOE policy decisions next week? Given the number of countries on holiday on Monday, if I were Japan’s Ministry of Finance, Monday would be an ideal day to quietly add some two-way risk into USD/JPY. ​ Volatility will be the winner next week. I’m glad I am away until Wednesday.

Asian equity markets are cautiously higher.

Asian equity markets are cautiously higher this morning ahead of a barrage of holidays next week. Although US index futures have fallen in Asia today after Amazon and Apple fell in extended trading, regional markets clearly fell the outsized gains in the official Wall Street session overnight outweigh those risks for now.

Wall Street rallied powerfully in the official session as the tail-chasing FOMO gnomes decided that the world wasn’t going to end, despite changing their minds on that point numerous times this week. The S&P 500 rallied an impressive 2.54%, with the Nasdaq leaping 3,14% higher, and the Dow Jones climbing by 1.86%. The earnings miss by Amazon, and forward outlook warnings by Apple and Intel have seen US futures fall in Asia, but not by as much as they rose in the official session. S&P 500 futures are 0.45% lower, with Nasdaq futures shedding 1.10%, while Dow futures are unchanged.

In Asia, Japan is on holiday, but South Korea’s Kospi has gained 0.72%, with Taipei rallying by 1.0%. In China, the removal of coal import duties and a move to halve stock transfer fees in Shanghai have had a minimal effect. Any gains are being weighed down by China officials reiterating their Covid-zero policy and Beijing schools being closed early to help prevent the virus spread there. Weekend PMI data and holidays next week are also muting activity. The Shanghai Composite is just 0.37% higher, and the CSI 300 is unchanged, but Hong Kong’s Hang Seng has followed the US rally and jumped by 1.80%.

In regional markets, Singapore has gained 0.75%, Kuala Lumpur is 0.10% higher, while Jakarta had added 0.45%. Bangkok is 0.25% higher, and Manila has slumped by 1.30%. Australian markets have followed the Wall Street session, albeit with less exuberance after the Amazon/Apple results. The ASX 200 and All Ordinaries have gained 0.70% today.

European markets rose yesterday in sympathy with New York and perhaps because of the capitulation on Rouble payments by large energy companies. Whether their political masters allow that to happen is another thing altogether, have signalled they will be breaking sanctions if they do. Additionally, a European oil import ban on Russia seems to be coming closer with oil prices rising overnight, with Germany and Hungary seemingly moving into that camp now. That is likely to limit gains on European markets which also face the usual weekend risk as well as a slew of GDP data today.

I am taking the rally today in Asia with a grain of salt as month-end flows may be distorting the true picture. Similarly, readers should apply the same scepticism to large moves in European and US markets this afternoon, although with Wall Street of its schizophrenia medication this week, anything could happen there.

US Dollar eases in Asia.

With liquidity reduced by a Japan holiday today, Asian markets have seen a wave of US Dollar long-covering giving some well-overdue relief to the major and regional currencies. The overnight session was notable for the pounding once again, of the Japanese Yen and Euro as the dollar index tested 104.00 intraday, before finishing 0.65% higher at 103.67. The dollar index has eased by 0.16% to 103.50 in Asia. The US Dollar fall in Asia looks very much corrective, and not a turn in sentiment. We can expect distortions today as well from month-end rebalancing flows from institutional investors.

The dollar index remains on track for a weekly close above 103.00, the top of a multi-year symmetrical triangle. That suggests a new wave of US Dollar strength in the months ahead targeting a move above the 120.00 region. In the short-term, resistance is at 104.00, with support at 101.00 followed by 99.75. The index is severely overbought on short-term indicators, so a deeper correction in the weekend is entirely possible.

EUR/USD remains under pressure, shrugging off the Rouble gas payment news and trading as low as 1.0470 overnight, finishing 0.56% lower at 1.0500. ​ It has booked a small gain to 1.0515 but the failure of the multi-decade decade support line at 1.0800 is a significant bearish development. A weekly close below 1.0800 consolidates that view. Although a short-term relief rally is not out of the question thanks to the oversold short-term technical picture, EUR/USD remains on track to test 1.0300. The response of European officialdom to the alleged plan to pay for gas in Roubles and any indications of a Europe oil ban on Russia will likely dictate if parity is tested in the weeks ahead.

GBP/USD traded as low as 1.2425 overnight, finishing the day 0.70% lower at 1.2460. In Asia, it has gained 0.29% to 1.2488 as some long-covering of US Dollar positioning occurs into the weekend, with month-end flows also in play. ​ Any relief rally will be short term as the broader technical picture is now signalling further losses to 1.2200 and potentially sub-1.2000 in the weeks ahead. GBP/USD would need to reclaim 1.2970, and then 1.3050 to change the bearish outlook.

AUD/USD has reversed its overnight losses on short-covering today, rising 0.50% to 0.7130. The rally remains unconvincing with resistance at 0.7200 and support at 0.7050. NZD/USD rose to 0.6505 today, having tested 0.6450 overnight. ​ Unless global risk sentiment swiftly reverses, both AUD/USD and NZD/USD are on track to test support at 0.7050 and 0.6525 respectively next week. RBA and election nerves will limit AUD gains over the next couple of weeks, but the New Zealand Dollar still looks like the most underweight lamb in the paddock.

USD/Asia is a mixed bag today. USD/CNY and USD/CNH shot higher once again overnight and remain 0.15% higher in Asia at 6.6350 and 6.6710 respectively. The reiteration of commitment to Covid-zero policies by officials today has quickly offset a generally weaker US Dollar in Asia. With PMI data over the weekend, and holidays next week, the offshore USD/CNH, faces substantial upside risks.

Regional currencies have booked some gains on US Dollar long-covering today ahead of the weekend. Leading the pack is USD/KRW, which has fallen by 0.45% to 1266.65 today after government officials threatened intervention if the Won moved too quickly. Elsewhere, regional currencies have booked modest gains of between 0.10% to 0.20% in quiet trading as books are trimmed ahead of a heavyweight holiday schedule next week.

Europe/Russia oil ban fears lift oil prices.

Oil markets rallied overnight and are also having a “wax-on, wax-off” week as they are bounced between China slowdown fears, and European energy bans, be they Russia or European-derived. Overnight, it was the energy bans that won the day as reports emerged that Germany and Hungary had moved into the ban on Russian oil imports camp. That sent Brent crude 2.05% higher to $107.35, with WTI gaining 3.05% to $105.10 a barrel. Asia is taking no chances ahead of weekend event risk and holidays next week. Brent crude has risen in Asia by 1.0% to $108.35, and WTI has gained 0.80% to 105.90 a barrel.

I believe there has been far too much complacency of late around the risks associated with either Russia or Europe imposing respective energy bans, or developments in the Ukraine war. If Europe is suddenly required to look for huge amounts of gas or oil supplies in international markets, that will offset China’s slowdown fears and send prices higher. That reality seems to be slowly permeating markets in the latter half of the week. In the short term, risks are skewed towards a retreat of $112.00 by Brent crude and $109.00 by WTI.

That would only lift oil prices into the middle of my wider expected medium-term range though. Neither event risk, is at this stage, enough, in my opinion, to move Brent crude out of a choppy $100.00 to $120.00 range, or WTI from a $95.00 to $115.00 range.

Gold gains on safe-haven flows.

The rot finally stopped in gold overnight, which tested support at $1880.00 an ounce, as well as its 100-day moving average, before rallying to close 0.45% higher at $1904.25 an ounce. Significantly, it achieved that even as the US Dollar continued to rally in New York markets. In Asia, pre-weekend hedging and a weaker US Dollar has lifted it another 0.53% higher to $1904.60 an ounce.

There is a definite sense that gold is benefitting from haven flows in the past 12 hours. That makes complete sense given the month-end and weekend risks in the world, as well as regional investors looking to hedge risk over the barrage of holidays next week. However, it is too soon to say that gold has completed its medium-term corrective sell-off as nothing breaks bullish traders’ hearts like gold.

A deeper correction by the US Dollar could ease the pressure on gold but I believe risks are still weighted to the downside. Failure of the 100-DMA at $1876.00 and the overnight low of $1872.00 signal further losses targeting the breakout triangle at $1835.00. It faces resistance at $1915.00, and $1940.00 an ounce.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Another Turbulent Day



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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

It’s been another turbulent session after stock markets turned sharply lower on Wednesday as investors fret over the outlook for the economy this year.

Results from Walmart and Target this week have brought into sharp focus the plight facing companies and consumers as inflation begins to bite. And that’s in a country that is still performing relatively strongly with a consumer that still has plenty of savings built up over the last couple of years. Others are not in such a fortunate position.

But inflation is catching up and profit margins are taking a hit. Soon enough though, those higher costs will continue to be passed on and consumers will stop dipping into savings and start being more careful with their spending. There’s a feeling of inevitability about the economy, the question is whether we’re going to see a slowdown or a recession.

The language we’re seeing from Fed officials isn’t filling me with confidence either. We’ve gone from them being confident of a soft landing, to a softish landing and even a safe landing, as per Patrick Harker’s comments on Wednesday. I’m not sure who exactly will be comforted by this, especially given the Fed’s recent record on inflation and past record on soft landings.

And it seems investors aren’t buying it either. A combination of these factors and no doubt more has sent equity markets into another tailspin, with Wall Street registering another big day of losses on Wednesday and poised for another day in the red today. Europe, meanwhile, is also seeing substantial losses between 1% and 2%.

Oil slips as economic concerns weigh

Those economic concerns are filtering through to the oil market which is seeing the third day of losses, down a little more than 1% today. We were bound to see some form of demand destruction if households continued to be squeezed from every angle and it seems we may be seeing that expectation weigh a little as we move into the end of the week.

Meanwhile, China is reportedly looking to take advantage of discounted Russian crude to top up its reserves in a move that somewhat undermines Western sanctions. Although frankly, it would have been more surprising if they and others not involved in them didn’t explore such a move at a time of soaring oil prices.

Still, I expect Brent and WTI will remain very high for the foreseeable future, boosted by the inability of OPEC+ to deliver on its targets and the Chinese reopening.

Gold buoyed by recession fears?

Gold appears to be finally seeing some safe-haven flows as markets react strongly to the threat of recession rather than just higher interest rate expectations. The latter has driven yields higher and made the dollar more attractive while the economic woes they contribute to seem more suited to gold inflows, it seems.

It will be interesting to see how markets react in the coming weeks if the investor mindset has turned from fear of higher rates to the expectation of a significant slowdown or recession. And what that would mean for interest rate expectations going forward. Perhaps we could see gold demand return.

Can bitcoin continue to swim against the tide?

Bitcoin is holding up surprisingly well against the backdrop of such pessimism in the markets. Perhaps because it’s fueled by economic concern rather than simply interest rates. Either way, it’s still trading below $30,000 but crucially it’s not currently in freefall as we’re seeing with the Nasdaq. Whether it can continue to swim against the sentiment tide, time will tell.

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Inflation Hits 40-Year High




By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

European equity markets are a little flat on Wednesday, with inflation data this morning once again offering a reminder of the struggles that lie ahead.

Not that we need reminding given all of the data we’ve seen recently. And then there are the gloomy forecasts from central banks, with even the Fed now targeting a softish landing which feels very much like the stage before a mild recession. It may be time to buckle up and prepare for a very bumpy year.

Will BoE move to super-sized rate hikes?

UK inflation is running at a 40-year high and it’s not peaked yet as the cost-of-living crisis looks set to squeeze the economy into recession. While annual inflation came in slightly below expectations at 9%, pressures are broad-based and as the year progresses, it is expected to hit double figures.

There is still plenty more pain to come for households, most notably when the energy price cap increases again in October. But price increases are broad-based, as evident in the jump in core inflation to 6.2%. This comes as the Bank of England has warned of more pain and a probable recession, as it continues to aggressively raise interest rates in the hope of being able to catch up without inflicting too much harm in the process.

Like many other central banks, it has been heavily criticised for its misjudged faith in pandemic-induced inflation being transient for too long. And in the UK’s case, the problem looks far greater and more widespread, with Brexit effects compounding the problems and driving up prices. Can the BoE afford to continue raising rates so gradually, as markets expect with 25 basis points every meeting or will they be forced to join their US counterparts with super-sized hikes? Pressure is mounting.

Oil higher as China starts reopening

Oil prices are on the rise again as Shanghai takes a big step towards reopening following three days of no new cases in the broader community. Restrictions have been tight in many cities across China which have helped keep a lid on oil prices in this very tight market. But with activity now likely to pick up, crude prices could be on the rise once more.

Efforts toward a Russian oil embargo have failed, with Hungary continuing to stand in the way. That could be slowing the rally in oil still, as could US talks with Venezuela which may eventually lead to additional supply. Although ultimately, this comes at a time when major producers simply aren’t producing as much as they should. Russia saw its output fall by another 9% last month as a result of sanctions, which contributed to OPEC+ producing 2.6 million barrels below target, lifting compliance with cuts from 157% to 220%.

Gold looking shaky once more

Gold is a little lower on Wednesday, as the dollar strengthens once more following a few days of declines. We’ve seen a slight corrective move in the greenback which has eased some of the pressure on the yellow metal but we may be seeing that return already. Gold is currently trading a little over $1,800 and a break of it could trigger another wave lower as investors continue to factor in more interest rate hikes and therefore higher yields.

The path of least resistance

With risk aversion starting to creep back in, bitcoin finds itself back below $30,000 which may make some a little nervous. It was always going to be difficult for risk assets to significantly build on the rally in the current environment. What may be encouraging to some is that we haven’t seen a sharp reaction to the move back below such a key level. Of course, that could quickly change with below appearing to offer the path of least resistance.

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Further Pressure on Central Banks



By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

It’s been a relatively calm start to trading this week, with Europe a mixed bag at the close and the US a little lower.

The weaker Chinese figures overnight will be of some concern at a time of slowing economic activity around the world. Still, as has been the case so often in recent years, the lockdowns will have heavily distorted the data. With lockdowns priced in to an extent, the key will be how quickly restrictions are lifted and then how well the economy bounces back.

Stock markets have come under heavy pressure globally as central banks have been forced to become part of the problem rather than the solution, as has so often been their job in the past. We’ve become very used to easy monetary conditions but now we have a devastating combination of a cost-of-living crisis, looming recession, very high inflation and much higher interest rates.

And as we’re hearing so often now, policymakers understand the pain that households are feeling and will experience going forward but getting inflation back under control is the primary focus. Which means further pain ahead.

The BoE monetary policy report hearing reflected everything we’ve heard in recent weeks as the UK heads for recession and double-digit inflation. Bailey and his colleagues accept how bad the situation in the UK is and the scale of the task at hand but whether they’re doing enough to address it is hard to say. They were among the first to start hiking late last year but have still been criticised for starting too late.

Oil near recent highs after falling on Chinese data

Oil prices have recovered earlier losses that came in the wake of the Chinese figures. While lockdowns have been priced in over the weeks, the numbers were much worse than expected which weighed heavily on crude. While an EU ban on Russian oil suffered another setback as Hungary stood firm against it, the bloc is continuing to work on an agreement while Germany is reportedly planning to phase it out regardless, which could be helping to support prices today.

Oil is trading around $110, towards the upper end of where it’s traded over the last couple of months. China looking to ease restrictions could keep prices more elevated having contributed to them trading at more reasonable levels. A move above $115 in Brent would be interesting, with that having been something of a ceiling for rallies over the last couple of months.

Gold flat but remains under pressure

Gold is flat on the day after slipping this morning below $1,800 for the second time in as many sessions. The yellow metal has been very vulnerable to rising yields and a stronger dollar recently as central banks are forced into much more aggressive action. With the dollar remaining a hot favourite and pressure intensifying on central banks to tackle inflation, gold could remain out of favour for a while yet.

Bitcoin struggles at $30,000

An impressive rebound in bitcoin after breaking $30,000 may already have run its course, with the cryptocurrency giving up earlier gains to trade a little lower on the day. It’s spent a little time over the last couple of days above $30,000 but it is struggling to hang on to them. That doesn’t bode well at a time of risk aversion in the markets and such negative coverage of stablecoins following the Terra collapse. There may be more pain ahead.

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