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North American News

The close: Small caps roughed up as quarter-end nears

  • Minimal changes for the main US markets
  • S&P 500 -0.1%
  • Nasdaq – flat
  • Russell 2000 -1.4%
  • DJIA+0.3%
  • S&P/TSX comp -0.9%

US Q1 final GDP -1.6% vs -1.5% expected

  • The third look at US first quarter 2022 GDP
  • The second reading was -1.5%
  • Core PCE prices final +5.2% vs +5.1% expected
  • PCE prices final 7.1% vs 7.0% 2nd reading
  • Deflator 8.3% vs 8.1% expected
  • Final sales -1.2% vs -0.5% expected
  • Consumer spending final +1.8% vs +3.1% 2nd reading
  • Inventory change +188.5 vs +149.6B 2nd reading

Percentage point contributions:

  • Inventories cut 0.35 pp from GDP compared to -1.09 pp in 2nd reading
  • Net trade cut 3.23 pp vs 3.23 pp in 2nd reading
  • Personal consumption added 1.24 pp vs +2.09 pp in 2nd reading
  • Gross private domestic investment +0.93 vs +0.10 pp in 2nd reading
  • Government spending -0.51 vs -0.47 pp in 2nd reading

Commodities

Gold Price Forecast: XAU/USD erases gains, back under pressure below $1820

  • Gold reversed from two-day highs and is back near weekly lows.
  • US dollar rises across the board following comments from Portugal.

Gold prices dropped sharply during the American session, erasing daily gains. XAU/USD peaked at $1833, the highest level in two days and then turned lower, falling to $1814, slightly above the daily low of $1811.

The reversal took place amid a rally of the US dollar. The DXY jumped toward 105.00, the highest level in a week. It is rising for the second day in a row as market concerns remain in place.

US yields eased on Wednesday even as central bankers offered a hawkish tone from Portugal where the European Central Bank is having its annual meeting. Fed Chair Powell warned about the risk to the economy from higher interest rates; however made it clear the biggest risk is losing price stability. ECB President Lagarde said they will consider the “anti-fragmentation” tool at the July meeting.

Short-term outlook

The bounce from $1811 weakened before reaching at $1835, a short-term downtrend line. A break above the mentioned level should open the doors to more gains, targeting initially $1845 and then levels above $1850.

While under $1835 the outlook is biased to the downside, with rising risks of more losses below the 20-Simple Moving Average in four-hour charts (currently at $1825).

XAU/USD is testing $1815 and below attention would turn to $1811 (June 29 low) and then to $1804 (June 14 low), the last defense of $1800.

OIl now flat on the day. US says it hopes OPEC+ will ‘move to Step 2’ on supply boost

  • What’s this step 2 talk?

Oil was falling before some comments crossed from US envoy Hochstein but this added to it:

  • Welcomed major change in attitude from OPEC+
  • Hopes OPEC+ will move to Step 2 of supply boost
  • Hopes OPEC continues putting on more supply
  • Says US can assess more SPR releases after October

The comment about further SPR releases is interest as well, though the reserve is already at the lowest since 1986. At some point, the need to refill it will put upward pressure on the back end of the curve. Ultimately, the potential for a super spike in oil comes when OPEC is out of spare capacity and the US has no more realistic oil reserves to release. That might not be far away.


EU News

European equity close: Sharp declines led by Germany

  • Closing changes in the main European bourses
  • Stoxx 600 -1.3%
  • UK FTSE 100 -0.1%
  • German DAX -1.6%
  • French CAC -1.0%
  • Italy MIB -1.1%
  • Spain IBEX -1.6%

Other News

Powell: Our aim is to have growth moderate

  • Powell at Sintra
  • Our aim is to have growth moderate
  • There are pathways to get back to 2% inflation with a strong labor market but the pathways have gotten narrower
  • Households are overall in a strong state and the same is true for businesses
  • Markets since last autumn have been pretty well aligned with where the Fed is heading
  • Is there a risk we could go too far? Yes, but it’s not the biggest risk
  • A bigger risk is failing to restore price stability
  • The way to accomplish lower inflation is to bring down growth

Lagarde: We’re unlikely to go back to a period of low inflation

  • Comments from Lagarde on the Sintra panel
  • We will consider our anti-fragmentation tool at the July ECB meeting

Lagarde says that the move away from globalization will end the era of low inflation. She also noted that inflation expectations are higher than before.

She said the ECB can move gradually but as uncertainty fades, can be more decisive. At one point she was led towards removing the option of 50 bps via ‘gradual’ talk but she pushed back.


Cryptocurrency News

ICYMI – Another Cryptocurrency exchange teeters

Posting this as an ICYMI, this snippet via CNBC:

  • Cryptocurrency exchange CoinFlex on Tuesday issued a new token to raise funds in a bid to restart withdrawals for its customers, after one client failed to repay a massive debt.
  • CoinFlex said it would issue $47 million worth of a digital coin, offering 20% interest, which it’s calling Recovery Value USD, or rvUSD.

20% interest. What could possibly go wrong?