North American News
The S&P and NASDAQ close lower for the 5th consecutive week
- A bad week for US stocks after earlier gains
Week ago today, the month of April ended with the NASDAQ index down over 13%. The market rallied on Monday, Tuesday, and Wednesday getting the month of May off to a good start. However yesterday’s sharp declines, and follow through selling today push the major indices lower on week. In other words the markets snatched defeat from the jaws of victory.
A look at the final numbers shows:
- Dow industrial average -98.6 points or -0.3% at 32899.38. The index close at 32977 last Friday. The index fell -0.23% this week.
- S&P index -23.51 points or -0.57% at 4123.35. The index closed at 4131.92 last Friday. The index fell This week -0.21% this week
- NASDAQ index -173.02 points of -1.4% at 12144.67. The NASDAQ closed at 12334.64. The index fell -1.54% this week.
- Russell 2000 fell -31.58 points -1.69% at 1839.56. It settle that 1864.10 last Friday. The index fell 1.37% this week.
This was the first stretch of five weekly declines in the S&P 500 since May-June 2011 and the first five-week losing streak in the Nasdaq since 2012.
Next week CPI data takes center stage. More Fed speak as well.
US April non-farm payrolls +428K vs +391K expected
- April 2022 US employment data
- Prior was +431K (revised to +428K)
- Estimates ranged from +188K to +571K
- Two month net revision -10K
- Unemployment rate 3.6% vs 3.5% expected
- Prior unemployment rate 3.6%
- Participation rate 62.2% vs 62.4% prior (was 63.4% pre-pandemic)
- U6 underemployment rate 7.0% vs 6.9% prior
- Average hourly earnings +0.3% m/m vs +0.4% expected
- Average hourly earnings +5.5% y/y vs +5.5% expected
- Average weekly hours 34.6 vs 34.7 expected
- Change in private payrolls +406K vs +385K expected
- Change in manufacturing payrolls +55K vs +35K expected
- Long-term unemployed at 1.5m vs 1.2m pre-pandemic)
- The employment-population ratio 60.0% vs 61.2% before pandemic (prior 60.1%)
Commodities
Gold Price Forecast: XAU/USD records minimal gains around $1885, though remains down in the week
- The yellow metal prepares to finish the week with losses near 0.60%.
- High US Treasury yields, led by the 10-year, around 3.12%, keep gold prices pressured.
- Gold Price Forecast (XAU/USD): Failure at $1890 would send gold prices tumbling towards $1835 (200-DMA).
Gold spot (XAU/USD) persist downward pressured, and it seems that it would finish the week with losses of around 0.60%, extending its fall from April’s swing high at around $1998.30s, below March’s lows around $1890. At $1884.74 a troy ounce, Gold Prices reflect the greenback’s strength.
Gold set to extend its weekly losing streak to three, as US Non-farm Payrolls smashed expectations
The gold push above the $1900 figure proved short-lived. It lasted no longer than some hours, shedding earlier gains post-Fed hike on Wednesday, retreating below solid resistance around $1890, so the yellow metal is ready to print its third weekly loss in a row. It is worth noting that the dip in XAU/USD is courtesy of higher US Treasury yields, led by the 10-year benchmark note, which rose to a daily high near 3.12%, closing to the 2018 year high at 3.24%.
Headwind for gold was also generated by a firm US dollar in the week. Albeit printing losses on Friday, down 0.03%, is up 0.29% in the week, as shown by the US Dollar Index, sitting at 103.511.
On Friday morning, the US Department of Labour reported the Nonfarm Payrolls report for April, which showed an increase of 428K jobs added to the economy, beating the estimations of 391K. The Unemployment Rate remained unchanged at 3.6%, and according to the report, it was led by gains in leisure, hospitality, manufacturing, transportation, and warehousing.
Regarding Average Hourly Earnings, on private nonfarm payrolls rose by 0.3% m/m. Meanwhile, the annual-based measure increased by 5.5%, almost unchanged, compared to the previous month’s reading of 5.6%.
Analysts at Commerzbank, in a note, commented that the labor market is robust, and it puts the US decline in GDP for the Q1 in perspective. They added that “this decline was due exclusively to significantly higher imports and lower inventory buildup. By contrast, domestic final demand increased strongly.”
“Employment growth remains high. In addition, companies still offer more than 11.5 million open jobs, indicating unchanged robust demand for workers. This demand is drawing from an increasingly empty pool of available labor, which is likely to keep wage pressures high,” added Commerzbank analysts.
Still, Commerzbank expects that the Federal Funds Rate upper bound would be 3.00% by the end of the year.
Gold Price Forecast (XAU/USD): Technical outlook
XAU/USD is still neutral-upward biased, but as long as it struggles to reclaim $1890, that could open the door for further downward pressure. Additionally, the 50 and the 100-day moving average (DMAs), with the latter at $1883.16, below the former, are resistance levels that cap higher prices.
Upwards, XAU/USD’s first resistance would be March’s lows around $1890. A break above would expose the $1900 mark, followed by May 4 swing high at $1909.66. On the flip side, gold’s first support would be the 100-DMA, at $1883.16. Once cleared, the next support would be May 3 cycle low, around $1850.34, followed by the 200-DMA at $1835.77.
WTI crude oil futures settle at $109.77
- Up $1.51 or 1.39%
The price of WTI crude oil futures are settling at $109.77. That is up $1.51 or 1.39% on the day.
The high price reached $111.18. The low reached $107.24.
A week ago the price closed on Friday at $104.69. Versus the settlement price today that is a gain of $5.08 or 4.85% for the week.
The high price reached $111.37 yesterday. The low for the week was $100.28 on Monday.
The high price this week fell short of the 50% midpoint of the move down from the March 2022 high at 111.75. Get above that level, would open the door for further upside momentum (if the price can stay above).
OPEC this week increased production by 432K barrels at their monthly meeting but they have also been having trouble meeting those production levels. Russia embargo will just tighten supply even more.
The good news is if the global economies slow from central bank tightening, fiscal tightening, higher inflation, Ukraine war, Covid lockdowns in China, etc, that could ultimately impact demand after the euphoria from re-opening is over.
EU News
European major indices close lower for the day and down sharply for the week
- France’s CAC down -4.2% this week
The major European indices are ending the day on a sour note. They are also lower for the week:
- German DAX, -1.6%
- France’s CAC, -1.7%
- UK’s FTSE 100 -1.5%
- Spain’s Ibex -1.3%
- Italy’s FTSE MIB -1.2%
For the trading week, the declines are also quite hefty:
- German DAX, -3.0%
- France’s CAC -4.2%
- UK’s FTSE 100 -4.28%
- Spain’s Ibex -3.05%
- Italy’s FTSE MIB -3%
In the European debt market
- UK 20 year yield reached the highest level since May 2016, while the 10 year yield is at its highest level since November 2015.
- German 10 year yields are at their highest level since July/August 2014
- France’s 10 year yield is at the highest level since June 2014
- Italian 10 years at the highest level since December 2018
Other News
US: Solid NFP report reinforces belief of another 50 bps rate hike on June – Wells Fargo
The US economy created 428.000 jobs for the second month in a row, near market expectations. According to analysts at Wells Fargo, the report is solid and reinforces their belief that the Federal Reserve will execute another 50 bps interest rate hike at its next meeting on June 14-15.
Key Quotes:
“Nonfarm payroll growth barreled ahead in April. Employment rose by 428K in the month, more or less in line with consensus expectations after accounting for modestly negative revisions to prior months. The labor force participation rate disappointingly fell two-tenths of a percentage point, but the decline came on the heels of a string of solid increases, and we are cautious about reading too much into today’s drop. Wage growth looks to be showing some tentative signs of peaking on a year-ago basis but is still running more than double its average pace in the 2010s.”
“As workers stream back into the labor market and the Fed steps on demand, we expect wage growth to moderate ahead. While the first quarter’s rise in the Employment Cost Index was a scorcher, there are other signs that wage hikes may start ease, indicated by small business compensation plans and reports from the Fed’s latest Beige Book. That said, wages are unlikely to slow to a pace consistent with 2% inflation anytime soon and point to elevated labor costs keeping the Fed on its hawkish path.”
“In the near-term today’s solid job report reinforces our belief that the FOMC will execute another 50 bps rate hike at its next meeting on June 14-15.”
Cryptocurrency
Binance Signs Five-Year Deal with Argentine Football Association
- This is Binance’s first sponsorship of a national football team.
- BNB to become only official fan token of the AFA.
Binance, the world’s largest cryptocurrency exchange, has signed its first sponsorship agreement with a national football team.
The digital exchange just entered into a five-year deal with the Argentine Football Association (AFA), Insider Sport reports.
The is coming five months after Binance entered into a partnership agreement with the Confederation of African Football, becoming the exclusive cryptocurrency and blockchain sponsor of the African Cup of Nations.
This new deal names the Cayman Islands-headquartered exchange as the main global sponsors of Argentina’s national teams.
The partnership also means that the Binance Coin (BNB), a token created by Binance in 2017, will become the only official fan token of the AFA while the partnership lasts.
Maximiliano Hinz, Binance’s General Director for Latin America, has said that the partnership will bring more technology and innovation to the Argentine sports industry and millions of fans.
The move will also “expand crypto adoption for the benefits of users, the cryptocurrency and blockchain community, and society in general,” Hinz explained.
Claudio Tapia, AFA’s President, said the collaboration will enable both partners to “project actions for five years, work on various projects and establish a work plan that will undoubtedly deliver great results for both parties.”
Tapia further explained, “For several years we have been significantly increasing AFA’s income and adding leading global brands in their fields.
“This agreement reinforces that strategy and adds an innovative multinational with a vision important for the future, in a new world like cryptocurrencies and fan tokens, where together we can grow and generate new sources of income for AFA and Pro League clubs. We welcome Binance to the AFA family.”
Finance and Football
In January, Binance landed a sponsorship deal with Brazil’s soccer league, Paulistão Sicredi, to expand its reach in the Latin America country.
The exchange had stated that the sponsorship enables its to launch exclusive products such as a platform for non-fungible tokens (NFTs) and live NFTs, among others.
Binance also currently sponsors Santos Futebol Clube, the Brazilian sports club based in Vila Belmiro in the city of Santos.
However, asides from cryptocurrency exchanges, forex and contract for difference (CFD) brokers are also seeking to penetrate new markets through football.
“Football has always had an important place in the history of Estonian sports,” the Chief Executive Officer of Admirals Group, Sergei Bogatenkov, had said.
“As the representative of Admirals, we are very pleased that we can be the background force for the current champions of Estonia.”