Wednesday's Federal Open Market Committee minutes were received as slightly hawkish, with the dollar gaining ground and equities suffering. "The S&P 500 index broke the key 2,700 line," reports Saxo Bank head of equity strategy Peter Garnry, adding that the Fed made upward revisions to its growth and inflation outlooks.
"We are seeing a weakness in short-term USD funding, and widening credit spreads – this likely reflects cash repatriation on the part of US corporates," Garnry notes.
Saxo's equities head also adds that we are in the middle of the worst macro environment in eight months with Eurozone PMI figures, US existing home sales, and US consumer confidence all falling short of expectations.
"We have the German Ifo survey out at 09:00 GMT today, so watch that as well as the $29 billion auction in seven-year US Treasuries," Garnry concludes.
The rise in the dollar has impacted commodities as well with gold seeking support and crude oil trending lower ahead of today's report from the US Energy Information Administration at 16:00 GMT.
"A new report shows the International Energy Agency seeing demand growth covered by non-Opec producers for the next two years, leaving Opec and Russia with little room to raise output," notes Saxo commodities head Ole Hansen. "The key support levels to watch are $61/barrel in Brent crude and $58/b in WTI," Hansen says.
While gold traders are increasingly nervous given the metal's fifth consecutive failure (since 2014) to break resistance, and gold prices are weighed down by a stronger dollar, Hansen believes that poor macro results and shaky equities markets remain supportive of gold with the current situation remaining firmly in the "buy the dip" zone.
Finally, Hansen reports that agricultural commodities look counter-cyclical and are ignoring the turmoil seen in stock and bond markets; Saxo's commodities head also reports that drought in Latin America is driving soybean prices notably higher.
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.