The Morning Jumpstart Macro View

OVERNIGHT MARKET SNAPSHOT FOR WEDNESDAY 12/05/21 (as at 7:15am AEST)

  • SPI200 (Jun) overnight futures down 45 pts to 7020
  • SP500 down 36.33 pts to 4152.10
  • NASDAQ Composite down 12.43 pts to 13389.43
  • Dow Jones down 473.66 pts to 34269.16
  • FTSE100 down 175.69 pts to 6947.99
  • DAX30 down 280.66 pts to 15119.75
  • GOLD futures US session (June) up $0.80 to $1838.40 an ounce
  • COPPER futures US session (Comex July) up $0.0817 to $4.7977 a pound
  • OIL futures US Session (Nymex Jun) up $0.36 to $65.28 a barrel
  • CRB Index up 1.40 pts to 207.55
  • AUDUSD trading at 0.7842
  • EURUSD trading at 1.2148
  • GBPUSD trading at 1.4145
  • USDJPY trading at 108.6400
  • USD Index US Session (ICE Jun) down 0.025 to 90.160

US indexes ended lower to continue where they left off Monday on a more broad based selloff from the open. The three major indexes all opened lower on higher inflation concerns with the Nasdaq managing to work its way off lows to end near breakeven while the DOW consolidated on the 200 day moving average. US 10-year bond prices again edged lower as yields grinded higher to reflect the sentiment of the market while the USD edged lower not showing the same concern. Traders are assessing inflation and do not have the same view as the Fed as raw material costs go up and employers may be forced to increase wages to lure in workers which in the end will translate to higher prices for goods. Burrito chain Chipotle announced it would hike the average hourly wage which may be the first of many that are forced to follow suit as the worker shortage continues in the face of a demand revival. The DOW closed down 1.36% while the broader SP500 ended down 0.87% and the Nasdaq closed down 0.09% for the session. In Europe, major Indexes were also hit hard on the open on inflation concerns as travel, retail and technology sectors were hit hardest. Traders are anticipating that the US Fed Reserve may be forced into action on interest rates earlier than they anticipate so will be watching the CPI data release in the US tonight closely for more info on the current state of play for inflation. Treasury Inflation-Protected Securities (TIPS) – a measure of inflation expectations and the latest thing traders are watching – jumped to show that the market is expecting inflation around 2.5% a year for the next decade, which is within the Feds tolerable range.

The USD Index edged its way lower which is generally at odds with the stock market concerns over inflation. Price action worked its way lower off 90.330 in the European session to retest Mondays lows before edging higher. With no real reaction in the US 10-year bond markets to inflation concerns, we expect the pressure in the near term to continue on the Dollar so will be watching for the 90 level to come under fire again but it will depend on the US CPI numbers tonight. The EURUSD held above the previous sessions lows to confirm a support zone around 1.2130. Buyers managed to lift price up off the level to retest and flush stops above the highs at 1.2177. The action suggests further consolidation between the two levels and may point to higher prices in coming sessions. The GBPUSD traded much the same as the Euro as price held between a range supported at 1.4105 and capped around 1.4158. If price can consolidate further then we expect there will be another leg higher, to extend on the recent move, targeting 1.4200 and above. The AUDUSD saw a very choppy session being helped by higher commodity prices to offset pressure from a risk off tone into shares. The Aussie was caught between the 0.7823 and 0.7850 levels swinging many times between the two. It seems that the Aussie, like other major pairs, is awaiting the US Consumer Price Index data for a direction into the USD. The USDJPY did break down through the 108.700 area to test the 108.350 level before finding a bid and reaction higher. If the 108.400 zone can not hold up then we expect to see further downside and a bigger squeeze on buyers off the 107.600 lows.

SPOT GOLD fended off an earlier move down as bulls fought back to rally into the US close. Buyers were helped by the softer USD to offset the move up in Bond yields. If the CPI matches expectations or comes in weaker, then we expect to see a move up in Bonds and hence Gold. The flush lower may be what the bulls need to push price up to the 1865 area and potential resistance. Crude Oil could not escape the market chop and volatility as price initially pushed below 64.00 only to ramp back up to test the 65.50 area. Bulls were supported by fears of a gasoline shortage after a cyber attack caused an outage at the largest US fuel pipeline system. The flush below 64.00 and rejection may be the line in the sand for bulls and could support a move higher but we expect that buyers have some more work to do to support a minor higher level. Copper also edged higher being supported by the continued weakness into the USD. The current leg up is being anchored at 4.7225 which we would expect to hold today and lead to a later run to retest the highs if price can clear the 4.8045 level convincingly.

Cryptocurrencies were generally supported and bid up after the recent selloff. Buyers continue to be convinced of higher prices as Bitcoin is currently trading at $56501.1 up 1.48%. Ethereum continues to hold the uptrend and is pushing to new highs trading at $4114.12 up 2.43% while Ripple is at $1.45962 up 1.84%.

The ASX200 circus continues as the previous sessions bulls were squeezed back out of the market yesterday on a move lower from the open. The Index was a sea of red with the IT sector taking the biggest hit down 4.18% while next in line was Energy stocks and the Gold. At the close the ASX ended down 75.8 points to 7097. Falling stocks outnumbered advancing ones by 1050 to 356 and 361 ended unchanged.

The ASX200 is expected to open down 40 points as the SPI200 moved lower off its days close to put more pressure on longer term bulls.

ECONOMIC DATA OUT TODAY (AEDT)

EUR German Final CPI 4pm

GBP Prelim GDP, Goods Trade Balance and Industrial/Manufacturing Production 4pm

EUR EU Economic Forecasts and Industrial Production 7pm

GBP BOE Gov Bailey Speaks 7pm

USD CPI Data 10:30pm

USD Crude Oil Inventories 12:30am

USD 10-Yr Bond Auction 3:01am

USD Federal Budget Balance 4am

SPI200 INTRADAY LEVELS TO WATCH