North American News
US equities fall again as the bond rout continues
- ‘Sell everything’ was the mode again
The S&P 500 briefly broke Friday’s low but managed to close just above it. There was some heavy selling into the close. The bigger question is whether the nearby June lows will hold?
On the day:
- S&P 500 -37 points, or 1.0%, to 3655
- Nasdaq -0.5%
- Russell 2000 -1.0%
- DJIA -1.1%
- Toronto TSX Comp -0.8%
US sells 2-year notes at 4.290% vs 4.274% WI
- Results of the $43 billion, 2-year note auction
- Prior was 3.307%
This is a tail of 1.6 basis points, which points to a reluctance of real money to buy fixed income at these rates. That’s the worst tail in 2s since Feb 2020.
The US government is paying nearly a full percentage point above last month, that’s nearly $1 billion in extra interest over the life of these bonds.
Commodities
Gold falls for three straight days, below $1650
- Gold price edges down but above the YTD low in the Asian session, around $1626.40.
- Risk aversion keeps traders’ flows toward the greenback, weighing on the yellow metal.
- Gold Price Analysis: In the near term could test the $1650 mark.
The gold price and the precious metals continue to be battered by dismal market sentiment, with US equities extending their losses and rising US T-bond yields, now with 2s and 5s, above the 4% threshold, while the 10-year gains almost seven bps, a headwind for the non-yielding metal. At the time of writing, XAU/USD is trading at $1640 a troy ounce, below its opening price by 0.09%.
Sentiment remains depressed. Worldwide recession worries, spurred by Fed’s aggressive tightening, alongside stickier than estimated inflation readings, keeps investors assessing if the economy may tap into a recession or not. In the meantime, the greenback remains in the driver’s seat, as the US Dollar Index has shown rising 0.40%, sitting at 113.585.
Meanwhile, the gold price dropped and hit a fresh 2-year low during the Asian session at around $1626.40, but it recovered some ground, falling short of hitting a daily high at $1650. With the lack of US economic data, with just the Chicago National Activity Index for August dropping to the 0 levels, Fed speakers began crossing newswires.
Atlanta’s Fed President Raphael Bostic said that he still believes the Fed can tame inflation without substantial losses in the labor market, given the current economic slowdown. He reassures that inflation s “too high,” adding that the US central bank needs to do all it can to control it.
Of late, the new Boston Fed’s President Sussan Collins said that for the Fed to achieve its inflation target, the unemployment rate needs to get higher without causing a spike in layoffs. She added that she would like “clear and convincing signs” that inflation is falling. She said, “a significant economic or geopolitical event could push our economy into a recession as policy tightens further.”
What to watch
The US economic docket will feature Durable Good Orders, Building Permits, Consumer Confidence and New Home Sales on Tuesday. Also, more Fed speakers would cross wires, led by Regional Fed Presidents Logan, Mester, Evans, Bullard and Daly.
Gold Price Analysis (XAU/USD): Technical outlook
From a daily chart perspective, XAU/USD remains downward biased, even though RSI shifted to oversold conditions. Breaking below the bottom trendline of a descending wedge at $1650 exacerbated the fall towards new YTD lows. In the one-hour scale, XAU/USD made a base nearby the S1 daily pivot at $1630, bouncing toward the current spot price, reclaiming the 20-EMA. Therefore, a re-test of the $1650 is on the cards.
Silver plunges to fresh three-week lows as US T-bond yields skyrocket
- Silver price plummets more than 2.50% due to overall US dollar strength.
- US Treasury bond yields rise, a headwind for the white metal.
- Silver Price Analysis: Once it falls below $18.00, a test of the YTD lows at $17.56 is on the cards.
Silver price slides to fresh three-week lows below $19.00, as US Treasury bond yields are rising sharply, with the US 10-year T-note rate hitting 3.90%, for the first time since April 2010, when the benchmark note fell from the 4% threshold. At the time of writing, XAG/USD exchanges hands at $18.35, below its opening price by 2.51%.
Risk aversion keeps global equities in the red, courtesy of the past week’s 500 bps of central bank interest rate increases as recession fears grow. Global bond yields are rising as the bond sell-off continues. US Treasury yields in the short end of the curve rose above 4%, while the US 10-year benchmark rate hit a daily high of around 3.90%.
XAG/USD plunges on high US T-bond yields
Money market futures are discounting a 75 bps rate hike at the Fed’s November meeting, a headwind for the white metal. In the meantime, Fed officials led by Atlanta’s Fed President Bostic and Boston Susan Collins crossed news wires.
On Sunday, Raphael Bostic commented that he believes the Fed can temper inflation without triggering substantial job market losses. He reassured that inflation is “too high,” emphasizing the need to control it.
During the last hour, Bostic crossed wires, acknowledging that events in the UK might put additional stress on Europe and the US in the already tense financial markets. In the meantime, the newest President of the Boston Fed, Susan Collins, commented that the unemployment rate needs to increase so that the US central bank can achieve its inflation goal. She added that she would like “clear and convincing signs” that inflation is cooling and that achieving a soft landing “while challenging, is achievable.”
Even though, Collins said, “a significant economic or geopolitical event could push our economy into a recession as policy tightens further.”
Elsewhere, the US Dollar Index, a measure of the buck’s performance vs. six rivals, edges higher by almost 1%, at 114.159, weighing on the US dollar-denominated silver.
From a technical perspective, it’s worth noting that XAG/USD tumbled below the 20-day EMA of $18.83, exacerbating a fall towards the $18.30s area. Furthermore, the Relative Strength Index (RSI). Shifted negatively, signaling that sellers are gathering momentum. Therefore, if XAG/USD breaks below the $18.00 figure, we could expect a re-test of the YTD lows at around $17.56 in the near- term.
WTI crude oil reverses and settles down $2.03 to $76.62. Nearly flat on the year now
- WTI crude closed 2021 at $75.21
Buying oil on the reopening of the global economy and the outbreak of war in Ukraine early in the year was a magnificent trade but the trade in the last three months is a central-bank led global recession and it’s all come undone.
WTI crude rose as high as $80.31 today but as bonds blew out again and stocks sank, another wave of oil selling hit. That left crude down $2.03 to $76.62. That’s $1.40 from being flat year-to-date.
EU News
European equity close: Flat but well above the lows. Italy gets a post-election bump
- Closing changes for the major markets in Europe
Italy outperformed today with the market giving the new government the benefit of the doubt. It’s a reminder that markets almost always breathe a sigh of relief after elections.
Closing changes for the main European bourses:
- Stoxx 600 -0.3%
- UK FTSE 100 -0.2%
- German DAX -0.4%
- French CAC -0.2%
- Italy MIB +0.9%
- Spain IBEX -0.6%
Other News
The bond market is kicking and screaming again
- US 10-year yields up 13 bps
US 10-year yields are up 13 bps to 3.82%.
I’m starting to think that a decade of money printing might have unintended consequences.
Cryptocurrency News
Cardano: $1 is a fever dream for ADA as Vasil hard fork fails to trigger buying pressure
- The hype behind the Cardano’s Vasil hard fork failed to materialize as the broader market fear kept ADA’s price closer to the lower lows.
- Consistently decreasing participation is resulting in declining network usage, which has brought the daily volume average down by 41% in a month.
- Fund 9 proved to be far more successful as Cardano noted a 53% increase in voting, born out of Community participation.
After Ethereum’s Merge, Cardano’s Vasil hard fork was the most anticipated event for the crypto community this year. Surprisingly, both the events, while developing the network further, acted as a disappointment for the investors and traders looking to profit off of the hype.