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Market News 【Market Morning】Fed ‘stabs’ Gold and US stocks again

【Market Morning】Fed ‘stabs’ Gold and US stocks again

Biden's refusal to standardize gasoline taxes has aggravated all parties' concerns about the two parties reaching an infrastructure agreement. The two major crude oil futures both closed up, and the U.S. oil discount to cloth oil narrowed sharply; gold has its worst weekly performance in more than a year, and the price of gold A one-way plunge of more than 100 US dollars; a crazy rise in the US dollar; the three major stock indexes fell across the board, the Dow fell more than 500 points, and Citigroup fell on the 12th consecutive day.

TOPONE Markets Analyst
2021-06-21
676

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Crude oil rebounded

Fundamental factors indicate that the crude oil market is still tight, and the two major crude oil futures rebounded from the decline of the previous trading day on Friday (June 18). As of press time, US WTI crude oil July futures rose 60 cents, or 0.84%, to close at $71.64 per barrel; Brent August futures closed up 43 cents, or 0.59%, to $73.51 per barrel. This week, U.S. oil closed up 1.03% cumulatively, and Bursa oil closed up 1.13% cumulatively.


Jeff Currie, head of commodity research at Goldman Sachs, said that the recent sharp sell-off in the commodity market is an opportunity to buy. Currie acknowledged that it will take longer to recover from the current decline than other recent rebounds, but he pointed out on Friday that the market continues to face supply shortages. He said that the only factor that can withstand actual price increases is to raise interest rates, not to talk about raising interest rates. The argument for bullish commodities has nothing to do with inflation risks and the Fed’s forward guidance, but with scarcity and strong physical demand.


Gold continues to fall

On Friday, spot gold closed at US$1,764.20 per ounce, down US$9.11 or 0.51%. It was the sixth consecutive day of closing. It hit the lowest point of US$1760.75 per ounce since May 3, and it fell sharply from the daily high. 36 dollars. This week, spot gold closed down 113.17 US dollars, or 6.03%.


As the U.S. dollar strengthened during the US trading session on Wednesday, the decline in gold began to expand, falling by nearly 5% in two days.


Colin Cieszynski, chief market strategist at SIA Wealth Management, said that although the decline was significant, it was not surprising. He added that technically, the price of gold was overbought before the Fed meeting. At the same time, the U.S. dollar was oversold. He said that he believes that this price movement is a major adjustment to excessive holdings in all financial markets.


USD rises

The U.S. Federal Reserve has unexpectedly turned to Eagles and is expected to raise interest rates in 2023 ahead of schedule, driving the U.S. dollar index to break through 92 and rise to a new high in more than two months.


The analysis indicated that the Fed's attitude toward the hawks is positive for the US dollar, and the US dollar index is predicted to further rise to 94.5. But whether it continues to strengthen depends on whether the central bank will suddenly turn back to dovish, the key also lies with the US Treasury Secretary Yellen, whether the policy of levying corporate profits tax will be brought to Congress in the third quarter.


If tax increases are expected to be introduced in the short term, the US dollar index may further exceed 94.5. However, if Yellen considers that interest rate hikes will bring shocks to the stock market and postpone the tax hike arrangement until next year before it is brought to Congress, I believe that the dollar will only struggle at the current level.


Three major stock indexes fell across the board

The continued influence of the Fed’s turning to hawks, coupled with St. Louis Fed Chairman Brad’s expectation that the bureau will raise interest rates for the first time at the end of next year, dragged down the Dow by more than 500 points, and the S&P 500 and Nasdaq fell by more than 1%. The U.S. Treasury yield curve flattened sharply. The yields of short-term U.S. Treasuries such as 2-year U.S. Treasuries rose, while the yields of long-term U.S. Treasuries such as 10-year Treasuries fell.


The Dow closed down 531.92 points, or 1.57%, to 33,291.53 points; the S&P 500 index fell 57.76 points, or 1.37%, to 4164.10 points; the Nasdaq closed 130.97 points, or 0.92%, to 14030.38 points. This week, the Dow fell 3.45%, recording its biggest weekly decline since October last year. The S&P 500 fell 1.91% and the Nasdaq fell 0.28% over the same period.


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