“Black Monday”: markets under pressure

Stocks sold heavily as the US yield curve saw short-term yields rise, while the 10-30 year also saw selling. This left the 2/10 year content at just 10 basis points and the 2/30 at just 16 basis points. It is uncomfortably close to the horizontal and we cannot rule out the possibility of a reversal, which the markets are using as a signal of recession. The 5/10 years are already.

With higher yields and markets seeking shelter, the US dollar skyrocketed, the euro took a beat along with other indicators, the Australian dollar, the New Zealand dollar, and the Korean won. Oil also fell once again today, as the US recession is complicated by massive COVID-19 tests over the weekend in Beijing and Shanghai.

It is turning into a Black Monday in Asia as well, after US and European equity markets took a hit on Friday as risks to China rise again. US stock index futures continued to fall this morning, oil continues to fall, the US dollar rose as Asian currencies recovered Friday’s greenback rally and Asian stock markets come under severe selling pressure.

It’s a measure of how quickly sentiment changed as gold managed to break out of its inverse correlation on Friday, ending the day higher at $ 1,871.50 an ounce. This indicates how nervous investors are now, although I would like to see another positive close against the strength of the US dollar and rising US yields before we talk about a medium-term low. As gold fell in Asia, I’m not sure it wasn’t another false dawn for gold prospectors.

A “Crypto Carnage” this weekend

Perhaps the greatest carnage has happened in the cryptocurrency space, which is about to come to its senses now that global inflation is no longer an issue and the realities of a new world where fixed interest is producing a comeback, although it still is. deeply negative in real terms. Bitcoin fell around 10% over the weekend, while Ethereum fell around 20%.

Today’s data calendar is non-existent which means markets may continue to bask in sentiment and risk aversion. Australian markets are closed today, but given the price action in Asia, they may be happy to be. The focus this week is undoubtedly the FOMC political meeting on Wednesday. I’m not sure if Friday’s inflation reading was enough to drive rates up 0.75%, although that doesn’t stop people from predicting it. A 0.50% hike has already been made and the crux will be what the Fed outlook is from here and whether it remains confident in a soft landing. The press conference following the meeting will certainly be one of the most exciting of the year.

Elsewhere, China will release its latest average lending rate between now and Thursday. Le réduire de 2.85% serait une surprise (pas une énorme surprise), car le gouvernement reste déterminé à mettre en place des mesures de relance ciblées et les prêts bankires ont déjà grimpé en flèche après que le gouvernement ait ordonné aux banques de prêter more.

The Federal Reserve isn’t the only central bank making a political decision this week. On Thursday, the Swiss National Bank would like to raise rates by -0.75%, but with risk aversion pushing the Swiss franc higher and the euro falling once again, it is stuck. The Bank of England will also meet on Thursday and the markets are looking for a 0.25% hike to 1.25%. Discussions about 0.50% will lead to nothing, as the BoE has already raised the white flag on inflation.

The most interesting meeting is that of the Bank of Japan on Friday. Quantitative easing should continue forever and 10-year JGB yields should be capped at 0.25%.

Stock sales in Asia continue

Stronger-than-expected US inflation data disappointed hopes for a less aggressive FOMC on Friday, prompting a sell-off in equity markets in the US and Europe. The S&P 500 was down 2.91%, the Nasdaq by 3.52% and the Dow Jones by 2.73%. Clearly, the Wall Street crash prompted a backlash in Asian markets today, and mass testing in China over the weekend put the pressure again. Japan’s Nikkei 225 fell 2.70%, South Korean Kospi fared slightly worse, down 2.75%, while Taiwan fell 2.25%.

In mainland China, the Shanghai Composite fell 0.85% and the CSI 300 fell 0.95%. There is no comfort for Hong Kong, the Hang Seng fell 2.90% today. In regional markets, Singapore is down 0.65%, Kuala Lumpur is down 1.50% and Jakarta is down 1.95%. Bangkok lost 1.25% and Manila lost 0.55%. Australian markets are closed, but New Zealand fell 2.30%.

Given the price action seen in Asia today, and especially the continued decline in US indices, European markets are unlikely to try to buy the decline.

Recession fears push oil lower

Oil prices eased slightly on Friday as US inflation eroded the Fed’s hopes for a soft landing. The declines were modest, however, highlighting that, despite the tight nerves of the economic downturn, the demand and demand situation. supply still remains stagflationary as ever. Brent closed 0.83% lower at $ 121.85 a barrel and WTI fell just 1.0% to $ 121.25 a barrel.

In Asia, oil fell again, this time after mass testing in Beijing and Shanghai over the weekend raised fears of a return to the bloc, reducing local demand. Brent and WTI fell 1.30% to $ 120.25 and $ 118.90 a barrel, respectively, near Friday lows.

Unless US markets anticipate a true recession and China pushes the lock button again, we are unlikely to see a sustained sell-off in oil prices. With OPEC + compliance approaching 200% and continued pressure on refined products like diesel around the world, supply and demand dynamics continue to support prices.

Over the short term, Brent Crude Oil has support at $ 119.50 and $ 118.50, with resistance at $ 122.00 and $ 124.40 a barrel. Brent has made four recent daily highs just above $ 124.00, suggesting further gains will be difficult, even if the downside is limited. The WTI has support at $ 118.00 and $ 117.00 a barrel, with resistance at $ 120.25 and $ 123.00 a barrel.

Gold rises thanks to the purchase of safe havens

Gold had an interesting session on Friday, shaking off rising US yields and a strong rally in the US dollar to record a 1.28% rise to $ 1,871.60 an ounce. Buying a safe haven, as stocks and cryptocurrencies plummeted, pushed gold higher as investors invested their money in the yellow metal to hedge risk over the weekend.

With the start of the new week, unfortunately to gold investors it appears that the gold price action is characterized by an air of routine. Gold fell 0.46% in Asia to $ 1863.10 an ounce as the US dollar continued to rally. Unfortunately, gold has a habit of making fun of gold investors, only to disappoint hopes with bearish corrections.

With that in mind, I’m not ruling out a continued downward correction and overall gold remains stuck in the $ 1830.00 – $ 1880.00 range with its 100-day moving average just above $ 1890.00 per ounce. Realistically, the technical picture calls for a close or two above $ 1900.00 an ounce to suggest that gold is moving again.