North American News
US major indices all close lower. S&P index closes down around -1%
- NASDAQ index 25% below its all-time high. S&P index is down close to -15%
The major US indices are all closing lower on the day. The declines are led by the S&P index which is closing down over 1%. The Dow industrial average is down around -0.8%.
Intel is the worst performer in the Dow after a report that they may miss on 2Q earnings. Intel shares a down -5.3% on the day
Although lower, the major indices are remaining in a sideways pattern that started on May 27. All 3 major indices are also still above their 200 hour moving averages keeping a modest bullish bias in the short-term. The final numbers are showing:
- Dow industrial Average fell -269.24 points or -0.81% at 32910.91
- S&P Index fell -44.89 points or -1.08% at 4115.78
- Nasdaq index fell -88.95 points or -0.73% at 12086.28
- Russell 2000 index fell -28.55 points or -1.49% at 1891.00
US treasury sells $33 billion of 10 year notes at a high yield of 3.030%
- WI level was 3.018% at the top of the auction
- High yield 3.030%
- WI level at the time of the auction 3.018%
- tail 1.2 basis points vs. six-month average of 0.5 basis points
- bid to cover 2.41X vs. six-month average of 2.50X
- directs 19.37% vs. six-month average of 17.3%
- Indirects 63.59% vs. six-month average of 69.1%
- dealers take 17.04% vs. six-month average of 13.5%
- Tail of 1.2 basis points is higher than the six-month average of 0.5 basis points as investors shun the auction
- international demand came in much weaker than the six-month average. Yesterday the 3 year auction also had much weaker international demand
- domestic demand was above average but came at a concession to the WI yield
- the bid to cover was also weaker than the six-month average
- dealers were left with an above average amount of 10 year notes to distribute after the auction
US weekly crude oil inventories +2025K vs -1917K expected
- Weekly EIA petroleum inventory data
- Prior was -5068K
- Gasoline -812K vs +1075K expected
- Distillates +2592K vs +1060K expected
- Cushing -1593K vs +256K prior
API data released late yesterday:
- Crude +1845K
- Gasoline +1821K
- Distillates vs +3376K
- Cushing vs -1839K
Commodities
Gold Price Forecast: XAU/USD bulls flexing but a 50% mean reversion could on in the making
- The gold price is correcting towards an hourly W-formation’s support structure.
- Bulls are starting to move in the following break of the 38.2% Fibo.
At $1,853, the gold price has stuck to a tight range on Wednesday despite some higher volatility in the forex space during the US session. Bulls have been trying to move in on-resistance but are being pushed back by a rally in US yields and the US dollar. Consequently, gold is pulling back on the hourly chart into a potential support area close to a 50% retracement of Wednesday’s hourly rally from $1,844.59 lows.
the US 10-year auction hit a high yield of 3.03% on Wednesday, up from the 2.943% high in the previous auction. We have seen a subsequent rally in US yields and the 10-year now stands 1.54% higher on the day, supporting the greenback, and weighing on US stocks and gold in a familiar synergy between the asset classes.
Meanwhile, traders will look ahead to key macro events later this week. These will include the European Central Bank tomorrow, Thursday, and US inflation data Friday.
”Core prices likely stayed strong in May, with the series registering a second consecutive 0.5% MoM increase. A drag on inflation recently, we now expect used vehicle prices to be a contributor, advancing for the first time in four months,” analysts at TD Securities explained. ”We also look for continued momentum in airfares and shelter inflation. Our m/m forecasts imply 8.4%/5.9% YoY for total/core prices.”
As for the ECB, the analysts said unless the governor, Christine Lagarde, ”commits to a series of 50s, EUR/USD has limited room to gain, particularly with the Euribor curve trading where it is and US CPI due the next day. Risk/reward more favorable for EURUSD to trade lower. Long-term inflation forecast will be key.”
In turn, this could keep the US dollar elevated into the US inflation data on Friday and hold the yellow metal back within familiar sideways ranges. However, much will depend on the tone of the ECB. The analysts at TDS also argued that the ECB will ”announce that the APP will end within weeks, and send a strong signal that rate hikes are coming in July and September (October remains a more interesting meeting in this sense). Forecasts will show stronger inflation and weaker growth, highlighting the ECB’s challenge going forward.”
Consequently gold could be attractive for its haven qualities. The weakening economic backdrop has enabled the precious metal to find some support from investors. The precious metal has recently pushed above $1,850, despite a stronger USD.
Silver Price Forecast: XAG/USD slumps but remains firm at around $22.10s ahead of US inflation data
- Silver is trading positive during the week, up by 1.12%.
- On Wednesday, high US Treasury yields and a solid greenback weigh on silver
- Silver Price Forecast (XAG/USD): Remains range-bound, trading between $21.28-$22.50 in the last month.
Silver (XAG/USD) slides from June 7 highs at around $22.28, courtesy of higher US Treasury yields and a steady greenback amidst a risk-off market mood, which has investors scrambling to safe-haven assets, but the precious metals complex. At $22.18, XAG/USD grinds lower by 0.39% at the time of writing.
Higher US Treasury yields and a solid greenback weigh on silver
The US Dollar Index, a gauge of the buck’s value vs. a basket of its rivals, is almost flat in the day, though slightly positive, at 102.342, recovering from earlier losses that dragged prices towards 102.269. The US 10-year benchmark note rate sits at 3%, gaining two-basis points, a headwind for silver prices.
European and US equities are falling, reflecting a dismal sentiment, weighed by rising bond yields. Investors assess global central banks tightening monetary conditions. As of Thursday, the European Central Bank (ECB) will be the next in line; though it is expected to hold rates unchanged, an announcement of the end of the APP can lay the ground for the first-rate hike in the July meeting.
Elsewhere, the OECD is the following international organization that shrank the expectations for a higher global economic growth rate. By 2022, the OECD estimates growth at 3.0%, lower than the 4.5% estimated, and by 2023, it will hit 2.8% YoY, less than the 3.2% foreseen.
In the meantime, XAG/USD prices remain on the defensive after opening above $22.20. As soon as Wednesday’s Asian session kicked in, prices fell, though the non-yielding metal reclaimed $22.00 after reaching a daily low near $21.80.
In the week ahead, the US calendar will feature Initial Jobless Claims for the week ending on June 4, followed by consumer inflation data, alongside the University of Michigan’s Consumer Sentiment.
EU News
European major indices close lower on the day
- Major indices close near the middle/lower end of the trading range
One day before the ECB meeting tomorrow, the major European indices are closing lower on the day. The ECB is expected to keep rates unchanged as they and the asset purchase program and gear up for the rate launch in July. Traders will be looking for clues on whether the Hawks will be successful in tilting the bias toward a 50 basis point hike potentially in July. The Reserve Bank of Australia raise rates by a greater than expected 50 basis points yesterday and the Bank of India also raise rates by a greater than expected 50 basis points today
The closing levels are showing:
- German DAX, -110.61 points or -0.76% at 14446
- France’s CAC -51.72 points or -0.8% at 6448.84
- UK’s FTSE 100 -5.93 points or -0.08% at 7593.01
- Spain’s Ibex unchanged at 8842.71
- Italy’s FTSE MIB -133 points or -0.55% at 24233
Other News
US natural gas prices plunge after reports of an explosion at LNG facility
- Police report explosion at Freeport LNG facility
US natural gas prices plunged after police reports of an explosion at the Freeport LNG natural gas facility near Freeport, TX.
Emergency crews are responding and the company said there are no reports of injuries and all personnel have been accounted for.
The three trains at the facility liquefy about 2 billion bfc per day for export. If it were to go offline that gas would be added to US supply.
In turn, it would mean less supply for Europe and Asia.
IMF’s Gopinath:It will be challenging to bring inflation back to Fed target w/o turbulence
- IMF’s Gopinath weighs in on US economy
The IMF’s Gita Gopinath is weighing in on the US economy and inflation saying:
- it will be challenging to bring inflation back to Federal Reserve target without turbulence
- The relevant question is not whether inflation peaked, but whether it will stay significantly above the Fed’s target for a long time
- Based on current projections, US inflation could stay above Fed’s target for a long time, there is risk of inflation expectations anchoring
- There is a narrow path for US rates not to go up by much, but risk is the possibility of much a steeper rate increases
Cryptocurrency News
Bitcoin trades in a volatile up and down trading range
- Most of the recent trading range between $29,184 and $31,536
The price of bitcoin remains in a volatile up and down price range. Going back to May 12, the digital currency has been between around $28,030 and $32,375. More recently, the range is between $29,184. The trading over the last 2 – 3 trading days has seen volatile up and down moves between those levels.
In between sits the 100 hour moving average at $30,308 and 200 hour moving average at $30,395. Can’t really say that moving averages and been perfect in defining bias, but has been price action near those levels going back in time. The current prices trading just above those moving averages at $30,481.
Needless to say, market traders are trying to figure out the next move in the digital currency.
Billionaire investor manager Michael Novagratz said today that two thirds of crypto hedge funds will fail as result of the consequences of the current market downturn.
He said,
“Volume will go down, hedge funds will have to restructure. There are literally 1,900 crypto hedge funds. My guess is two thirds will go out of business.”
He also blamed digital asset negative market reaction to the Federal Reserve’s removal of stimulus.