After the volatility of the US session yesterday (driven by the ECB and an Advance US GDP miss) there is a mild risk negative bias early today. Concerns over the cost pressures and supply chain issues hitting corporate US earnings also play into this. The focus is again on inflation in the economic calendar.
- Main drivers: Slightly negative market sentiment with a correction in equities; Inflation in focus today; Eurozone growth and inflation, and US core PCE on the calendar.
- Mild negative sentiment: Despite edging new highs yesterday, a degree of profit-taking is threatening again on indices, after two tech giants (Apple and Amazon) missed estimates on results. A mixed Asian session has given way to the early downside in Europe.
- Apple & Amazon miss estimates, weigh markets down: Wall Street closed higher, but the two tech giants reported weaker than expected earnings after the close. Higher costs and supply chain issues were blamed. [Negative for Indices]
- Facebook changes its name: the social media giant (which is fast becoming a conglomerate) has rebranded itself, changing its name to “Meta”.
- Inflation the focus: After EUR spiked higher on the ECB admitting that inflation would take longer to fall, the hard Eurozone HICP data is today. There is also a focus on US inflation too, with the Fed’s preferred inflation gauge, the core PCE. [FX volatility]
- Central bank speakers: No Fed speakers – FOMC in the “Blackout Period”.
- Economic Data:
Eurozone flash GDP at 0900GMTexpected to drop to +2.0% (from +2.2% final Q2.
Eurozone flash inflation at 0900GMT expected to increase to +3.7% on headline inflation (from +3.4%) but core inflation is expected to remain at +1.9% (+1.9% in September)
US Core Personal Consumption Expenditure at 1230GMTexpected to increase by +0.2% MoM), with year on year core PCE up to +3.7% (from +3.6% in August)
US Employment Cost Index at 1230GMTexpected to increase to +0.9% in Q3 (from +0.7% in Q2)
Michigan Sentiment (final) at 1400GMT no revision expected at 71.4 in October (71.4 flash October, 72.8 final September)
Broad outlook: USD has been hit hard in the past 24 hours. It is a mixed outlook early today, but there is no real sign of recovery yet. Profit-taking is hitting European markets.
- Forex: USD has been unable to claw back yesterday’s losses yet.
EUR/USD spiked higher on the ECB meeting. This is now a crucial test around 1.1665/1.1685 resistance as the rally has just stalled slightly. Above 1.1700 opens further recovery.
GBP/USD is still in a consolidation range of 1.3710/1.3830. Mixed outlook for now, with a slight positive bias.
AUD/USD the USD weakness is helping the pair higher, a close above 0.7545 opens 0.7600/0.7620. We remain positive whilst the support at 0.7450/0.7475 holds.
- Commodities: the USD weakness has not played into commodities. Risk aversion is seeing silver underperform gold.
Gold Another failure around $1810 questions the strength of recovery and leaves us cautious of any upside break. For now, it is intact but the uptrend comes in around $1788. Pivot support is at $1780.
Silver dropping back to test its uptrend (also adds to our caution for gold). 4 hour chart momentum is turning corrective. Decisively below $23.83 adds to growing downside momentum. Bulls need above $24.25 to be positive again.
Brent Crude oil A rebound from $82.40/$82.70 support leaves the bull run questioned but not broken yet. However, the rebound needs to continue above $85.25/$85.50 to re-engage.
- Indices: European markets turning lower, and Wall Street threatening to do so.
S&P 500 futures another pullback from all-time highs overnight increases a sense of profit-taking potential. Momentum is also beginning to falter. We remain cautiously positive above 4548 support. Below 4515 would increase near term correction.
DAX retreating to test 15,600 again. The bulls need to respond soon. Below 15,393 turns corrective again.
FTSE 100 sliding back and putting pressure on 7180 support. The bulls need to hold on to this to prevent a correction from forming.