We’re amidst another busy week for the Fed with 16 public appearances scheduled overall, with Powell, Mester and Daly hitting the wires overnight.
Equities higher because the Fed push strong economy with transient inflation narrative
San Francisco’s Federal Reserve System President Mary Daly told reports she was “bullish on the recovery”, “substantial” progress had been made towards the Fed’s 2% inflation target and financial condition goals. But, perhaps more importantly, she thinks the Fed could also be during a position to start tapering this year. This last point alone was enough to topple equities when James Bullard effectively read from an equivalent script on Friday, yet Jerome Powell soothed any negative response from markets together with his persistent view that inflation are going to be transitory, when he witnessed congress separately.
Bond yields were lower across the curve the US 10-year yield falling -2.2 bps below 1.5% and therefore the 2-year was down -2.6 bps to a two-day low of 0.23%. On the economy, Powell said labour demand is extremely strong and expects strong job creation in autumn. Lorretta Mester is additionally within the ‘transient’ camp and expects inflation to rise to around 3% to three .5% this year before falling back to a quarter in 2022, adding she expects employment to fall below 4% by next year.
The message of a ‘strong, but not too strong’ recovery was music to Wall Street’s ears, technology stocks took the lead with the Nasdaq 100 closing to a record high and therefore the Nasdaq’s biotech index now up 5.6% month-to-date. The S&P 500 stopping just in need of its own record high with eleven S&P 500 sectors closed the green.
The ASX200 recouped most of Monday’s losses during its best session in three-months yesterday, to shut with an outsized bullish inside day. Information technology sector is that the best performer month-to-date, although with an RSI (2) reading of 99.52 it’s at high risk of over-extension over the near-term. At the opposite end of the size , the ASX Allords gold miners index is currently down -10.7% over an equivalent period as they tracked gold prices lower.
Commodities: OPEC discuss raising boring
Brent rose briefly above $75 for the primary time in two years yet reversed earlier gains as OPEC+ discussed raising boring . alittle bearish pinbar formed on the daily chart and closed back below 74.95, although early trade Asia has seen it return back above that level with net resistance of 78.58 in view . WTI futures closed just beneath 73.15 after a quick spell above it and formed alittle indecision candle.
Gold’s rally lost momentum and closed -0.24% lower. Its direction over the near-term is now a touch unclear and therefore the reward to risk ratio appear inadequate on the daily chart for bears. However, key levels for to watch from here are 1756, 1760 and 1770.64 as support and 1790 and 1800 a resistance.
Copper prices have broken two key levels of support over the past two weeks; the 4.435 level and therefore the October trendline. We outlined a bearish case before these key levels broke supported a big reduction of net-long exposure this year (see 1:30 within the video), and we’re not entirely convinced the -16% decline from its peak is enough considering China are continuing to curb commodity prices. So, over the near-term we are monitoring copper’s potential to make a bearish reversal at the broken trendline and make its thanks to the three .943 – 4.00 lows.
That said, some noise are often allowed around a trendline break (spikes either side of it) although a clean retest and drop is usually preferred. And given the established decline in net-long exposure, we’d still seek potential shorts further out below 4.435 if prices were to interrupt back above the trendline.