NY Open: Reality intrusion blurs trade illusion

Equities 4 minutes to read

Michael O’Neill

FX Trader, Loonieviews.net

Summary: US markets gave up a good percentage of yesterday's gains into the open as new reports on the substance of the Sino-US trade discussion undercut the ultra-bullish narrative.

Wall Street opened with a thud. The Dow Jones Industrial Average, S&P 500 and Nasdaq gave back over half of yesterday’s gains by 14:00 GMT, as traders took direction from European and Asia price actions and the bond market. US 10-year Treasury yields are a few ticks higher than yesterday’s low, but the rally lacks conviction. Bond traders appear to believe that Fed chair Jerome Powell turned dovish and are downgrading their 2019 rate hike forecasts. Hopes that Powell would clarify his thoughts in Congressional testimony on Wednesday were dashed when his testimony was cancelled.

Wednesday was declared a Day of Mourning to honour the late George H.W. Bush. All US government offices and Wall Street are closed.

Markets are also confused by the Trump/Xi dinner results. The White House press release about the dinner vastly differs from the statement from Beijing. Washington’s version has specific details, while China’s statement is vague. China doesn’t mention anything about reducing tariffs on US cars although Trump tweeted that tariffs would be removed.

The US dollar opened with losses against the G10 major currencies. Those gains have been eased somewhat in a nervous market. The economic data calendar is empty, which isn’t helping. USDCAD managed to scrape higher supported by renewed WTI oil selling pressure. The Canadian dollar is more sensitive to oil price moves lately, because of the Province of Alberta’s decision to cut production by 8.7% or 325,000 barrels/day. It is not an attempt to support Opec but rather a way of addressing rising inventory issues due to a lack of delivery capacity.

GBPUSD retreated from its New York opening level with prices dropping from 1.2819 to 1.2748, which is just above the overnight low of 1.2721. Traders appear to have re-evaluated the benefits to GBPUSD from the EU court opinion that the UK could unilaterally revoke Article 50. To many, that news just adds to the confusion ahead of the House of Commons vote on December 11.

Latest Market Insights

Equities

Video: Hermes, Tesla, Pilbara Minerals claim top spots so far in 2023; why their stocks could change course this week

Bonds

Technical Update - US Treasury yields in falling corrective patterns. Maybe new direction in coming days

Equities

Technical Update - S&P 500 and Nasdaq 100 failing to break key resistance. Dow Jones range bound

Commodities

Technical Update - Correction in Gold, Silver and Copper unfolding. Here are the levels to look out for

Podcast

Podcast: The squeeze ran out of oxygen. Blitz of event risks into Friday

Macro

Financial Markets Today: Quick Take – January 31, 2023

Equities

Video: Will FAANGs results bite into markets and what if the Fed says it won’t cut rates this year, like the market thinks

Equities

Market Insights Today: – Profit-taking in a risk-off session, higher inflation in Spain, central bank decisions and corporate earnings ahead, US-China tech war - 31 January 2023

Outrageous Predictions 2023: The War Economy

Billionaire coalition creates trillion-dollar Manhattan Project for energy
The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
Read article
French President Macron resigns
The political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Read article
Gold rockets to USD 3,000 as central banks fail on inflation mandate
As markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
Read article
EU Army forces EU down path to full union
With continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
Read article
A country agrees to ban all meat production by 2030
In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
Read article
UK holds UnBrexit referendum
Following a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Read article
Widespread price controls are introduced to cap official inflation
History tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
Read article
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve asset
Sanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
Read article
USDJPY fixed to the USD at 200 as Japan overhauls financial system
Following the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Read article
Tax haven ban kills private equity
With the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.
Read article