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Market News Financial breakfast on May 20: Weak employment data, the dollar hit a two-week low, and the price of gold soared and recovered the 200-day moving average

Financial breakfast on May 20: Weak employment data, the dollar hit a two-week low, and the price of gold soared and recovered the 200-day moving average

Weak U.S. jobs data overnight exacerbated concerns about the economy, U.S. bond yields fell, and the U.S. dollar fell to a nearly two-week low of 102.65, helping gold prices rise above the 200-day moving average of 1839, with a maximum rise around 1850, a bullish signal for short-term gold prices significantly enhanced. Oil prices rose in choppy trade on Thursday, rebounding from a two-day losing streak, helped by a weaker U.S. dollar and expectations that a possible easing of lockdown measures in Asia would boost demand.

TOPONE Markets Analyst
2022-05-20
9091
At the beginning of the Asian market on Friday (May 20), spot gold fluctuated slightly and was currently trading around $1,844. Weak U.S. jobs data overnight intensified concerns about the economy, U.S. bond yields fell, and the dollar fell to a record low. The new low of 102.65 in the past two weeks helped the gold price rise above the 200-day moving average of 1839, and the highest rose to around 1850. The short-term bullish signal for gold prices has been significantly strengthened. Oil prices rose in choppy trade on Thursday, rebounding from a two-day losing streak, helped by a weaker U.S. dollar and expectations that a possible easing of lockdowns in Asia would boost demand.



In terms of commodities closing, July Brent crude oil futures settled at $112.04 a barrel, up $2.93, or 2.7%. U.S. crude for June delivery rose $2.62, or 2.4%, to settle at $112.21 a barrel. U.S. gold futures rose 1.4% to $1,841.30.

At the close of U.S. stocks, the S&P 500 fell 0.58% to close at 3900.79 points. The Nasdaq lost 0.26% to 11,388.50 and the Dow Jones Industrial Average fell 0.75% to 31,253.13.

Friday ahead





List of main market conditions in the world




U.S. Wall Street stocks ended lower in choppy trading on Thursday, as Cisco Systems tumbled after a dismal forecast and investors worried about inflation and rising interest rates.

Cisco tumbled 13.7% after the networking equipment maker cut its 2022 revenue growth forecast, weighed down by its exit from Russia and a shortage of parts due to coronavirus lockdowns in Asia.

Apple and chip maker Broadcom fell 2.5% and 4.3%, respectively, weighing on the S&P 500.

"The reality is that inflation is heating up and interest rates are climbing," said Terry Sandven, chief equity strategist at USBank Wealth Management in New York. It will last most of the summer."

Twitter climbed 1.2 percent after news reports said company executives told employees that Musk's $44 billion acquisition deal was moving forward as expected and that they would not renegotiate the price.

The S&P consumer staples sector fell 2 percent to its lowest level since December, with retailers bearing the brunt of the blow to the purchasing power of U.S. consumers from higher prices.

Kohl's KSS.N became the latest retailer to be hit by a 40-year high in inflation, as the department store chain cut its full-year profit forecast.

However, Kohl's shares rebounded more than 4 percent after tumbling 11 percent in the previous session, hurt by dismal results from Target TGT.N.

The S&P 500 is down about 18% from its record closing high on Jan. 3, as investors adjusted for strong inflation, geopolitical uncertainty stemming from the war in Ukraine and tightening financial conditions from the Federal Reserve's rate hike.

According to a widely used definition, a close 20% or more below its record high in January would confirm that the S&P 500 has been in a bear market since that high.

Goldman Sachs strategists see a 35% chance that the U.S. economy will enter a recession in the next two years, and Wells Fargo Investment Institute expects a mild recession in late 2022 and early 2023.

As of the close, the S&P 500 fell 0.58% to close at 3900.79 points. The Nasdaq lost 0.26% to 11,388.50 and the Dow Jones Industrial Average fell 0.75% to 31,253.13.

Stocks were mixed on Thursday after the S&P 500 fell more than 4% on Wednesday, its biggest one-day drop since June 2020.

The CBOE Volatility Index fell to 29.5 on Thursday, after hitting its highest since May 12 earlier in the session.

Canada Goose shares rose nearly 10% after the company expected its annual earnings to remain upbeat on strong demand for its expensive down parkas and down jackets.

precious metal


Gold prices rose more than 1.5% on Thursday, with spot gold reaching as high as $1,849.11 an ounce and closing at $1,841.76 an ounce. Weak U.S. jobs data exacerbated concerns about the economy, and the dollar and U.S. bond yields fell, enhancing gold’s safe-haven appeal force. Meanwhile, U.S. gold futures rose 1.4% to $1,841.30.



Gold fell to a near four-month low earlier on Monday, gaining about 3% since the dollar retreated from a 20-year high.

"The dollar is falling and yields are clearly lower, which is good news for gold," said Edward Moya, senior analyst at OANDA.

The dollar fell 1 percent, making gold cheaper for overseas buyers. U.S. Treasury yields fell to three-week lows.

Initial jobless claims rose unexpectedly last week, even as the number of U.S. continuing jobless claims was at its lowest level since 1969 in early May.

Global stock markets slid further as fresh signs of slowing economic growth prompted investors to sell stocks in favor of safe-haven assets, further boosting the appeal of the safe-haven metal.

crude


Oil prices rose in choppy trade on Thursday, rebounding from a two-day losing streak, helped by a weaker U.S. dollar and expectations that a possible easing of lockdowns in Asia would boost demand. Crude oil, the two major benchmarks, continued to fluctuate wildly, gaining nearly $5 a barrel in a matter of hours, recouping losses earlier in the week.



"The market is very volatile," said Andrew Lipow, president of Lipow Oil Associates. "The market is reacting to all kinds of news every hour, and the volatility in the oil market is increasing day by day."

July Brent crude futures settled at $112.04 a barrel, up $2.93, or 2.7%. U.S. crude for June delivery rose $2.62, or 2.4%, to settle at $112.21 a barrel.

Investors are closely watching Shanghai's plans to ease the lockdown, which could drive a rebound in Chinese oil demand. The actual number of new positives for the new crown in Shanghai hit a two-month low, and there have been zero new cases in the society for five consecutive days.

A weaker dollar also boosted oil markets.

However, crude oil gains were limited, with the two major benchmarks stuck in ranges due to an uncertain demand path. Investors have been reducing exposure to riskier assets, worried about rising inflation and more aggressive central bank action.

A possible imminent EU ban on Russian oil imports has been supporting prices. This month, the European Union proposed a new package of sanctions for Russia's invasion of Ukraine, which Moscow described as an "extraordinary military operation."

foreign exchange


The U.S. dollar fell across the board on Thursday, hitting a new low of 102.65 in the past two weeks and closing at 102.87, down about 1%, continuing the trend of falling from a 20-year high. Most major currencies have been hit hard by the appreciation of the U.S. dollar this year, attracting Buyers enter.



The dollar fell sharply against the yen and Swiss franc, two currencies that tend to attract investors during times of market stress or risk, amid rising volatility in global financial markets. USD/JPY hit a new intraday low of 127.02, and USD/CHF hit a new intraday low of 0.9696.

However, riskier currencies such as the Australian dollar and New Zealand dollar have fared better, and their severe year-to-date losses have attracted some buyers.

Shaun Osborne, chief currency strategist at Scotiabank, said: "Investors may have had enough of the dollar and are looking to diversify risk -- especially at a time when the dollar's broader support from rising U.S. bond yields appears to have reached its limit. circumstances."

It’s worth noting that including Thursday, the U.S. dollar index has recorded only six one-day losses of 1% or more in the past five years.

The dollar hit a near 20-year high last week, boosted by a hawkish Federal Reserve and growing concerns about the state of the global economy. The U.S. dollar index has risen 7.5% this year.

Analysts, however, cautioned against reading too much into the dollar's pullback.

Simon Harvey, head of European FX analysis at Monex, said: “Yes, the cross-asset space is in a safe-haven state, with the dollar broadly lower on Thursday, but does that mean the dollar’s safe-haven status is starting to wane? Probably not.”

The Swiss franc and euro were supported as Swiss National Bank President Jordan suggested on Wednesday that the Swiss central bank was ready to act if inflationary pressures persist.

The euro against the U.S. dollar refreshed the recent two-week high of 1.0606 and closed at 1.0580, an increase of about 1.14%, as investors digested the possibility of the European Central Bank's recent sharp monetary tightening.

Sterling rose 1.02% against the dollar, but was still far from a two-year low hit last week, with gains limited by a surge in British inflation and a bleak growth outlook.

international news


U.S. plans to send advanced anti-ship missiles to Ukraine to counter Russia's blockade of waterways Powerful weapons capable of sinking Russian warships will intensify the conflict. Current and former U.S. officials, as well as congressional sources, have pointed to obstacles to delivering longer-range and more powerful weapons to Ukraine. But three U.S. officials and two congressional sources said two powerful anti-ship missiles -- Boeing's Harpoon and Kongsberg and Raytheon's Naval Strike Missile (NSM) -- were actively considered. Direct shipment to Ukraine, or through European allies that own the missile.

The G7 pledged $18.4 billion to help Ukraine tide over the crisis, and Biden backed Fenri to join NATO
The Group of Seven (G7) agreed to provide Ukraine with $18.4 billion to help the country pay its bills. Ukrainian Prime Minister Shmegar said the funding, which will accelerate Ukraine's victory over Russia, is as important as "the weapons you provide." The West has also made further pledges of arms aid. U.S. Secretary of State Blinken said he had approved an additional $100 million in weapons, equipment and supplies to Ukraine. U.S. President Joe Biden expressed support for Sweden and Finland to apply to join NATO after Russia invaded Ukraine.

U.S. jobless claims hit a four-month high last week, but continuing claims continue to fall It was the highest since the month and could signal a cooling in demand for workers amid tightening financial conditions. Continuing claims for unemployment benefits fell by 25,000 to 1.317 million in the week ended May 7. This is the lowest level since December 1969. Despite the rise in initial jobless claims, continuing jobless claims are trending down.

Barclays and Goldman Sachs are bearish on U.S. stocks, saying there will be more pain in the future ① Barclays expects more pain in the future after the major U.S. stock indexes hit their biggest one-day drop in two years on Wednesday.
2 Barclays strategists said in a report on Thursday that U.S. corporate profit margins and their forward earnings have been pressured by a variety of factors, including the harsh epidemic containment in Asia, the war in Ukraine and the hawkish Federal Reserve. position.
③ "Given the recent bearishness of the S&P 500, we believe risks remain firmly skewed to the downside," they said in a research note.
④ Barclays said that Meta Platforms, Apple, Amazon, Netflix (Netflix) and Alphabet reported lacklustre results in the current earnings season, which is a major reason for the drag on the S&P index. The weak results were the biggest negative drag on the broader market index in seven years.

ECB meeting minutes: Some members hope that monetary policy action will not be delayed without reason ① The minutes of the ECB meeting on April 13-14 show: "Some members believe that action should be taken without unreasonable delay, thus demonstrating that the Governing Council has achieved a medium-term Determination of price stability.”
② These members believed that the loose monetary policy stance “is no longer in line with the inflation outlook, and these concerns have been exacerbated by past forecast errors in headline and underlying inflation. However, other members believed that an overly aggressive adjustment of the monetary policy stance could be counterproductive”, Because the policy cannot solve the direct cause of the price increase, the minutes of the meeting stated, "In general, members generally believe that the stance of monetary policy should continue to be gradually normalized and adjusted according to the medium-term inflation outlook. In this process, the Governing Council has already Launched at the December meeting last year

International Monetary Fund (IMF) President Georgieva said on Thursday that global financial leaders may need to adapt to fight against multiple rounds of inflationary pressures.
2 Georgieva told Reuters on the sidelines of a meeting of G7 finance ministers and central bankers in Germany that the coronavirus outbreak in Asia is under pressure as Russia’s war in Ukraine puts pressure on energy and food prices. Controls have battered manufacturing and the need to rearrange supply chains to make them more resilient, making it increasingly difficult for central banks to reduce inflation without causing a recession.
③ She said: "I think we need to start accepting that this may not be the last shock." She pointed out that after the outbreak of the Omicron variant caused a sustained backlash at the end of last year, she stopped seeing inflation as a A "short-lived" one-time shock.
④ She said that strong demand from the United States, supply chain disruptions and the impact of the war in Ukraine all point to more persistent inflation. She added that the Covid-19 pandemic is not over and there could be another crisis.
⑤ Georgieva said that efforts by countries to transform their supply chains from maximum efficiency to high resilience will increase some costs because there will be some redundancy

Kansas City Fed President: Market turmoil will not change the Fed's tightening plan ① Kansas City Fed President George said that "the turbulent performance of the stock market over the past week" is expected, reflecting the impact of monetary policy tightening to a certain extent. Her support for a 50 basis point hike was unchanged.
② "I think what we're looking for is to pass our policy through market expectations, and tightening is expected," George said in an interview on Thursday. "That's one of the ways that financial conditions are tightening."
③ The Federal Reserve raised interest rates by 50 basis points earlier this month, and Chairman Powell hinted that the Fed will take action of a similar scale at its June and July meetings. support.
④ "Inflation is so high now that we need a series of interest rate adjustments to bring it down," she said. "We do see financial conditions start to tighten, so I think that's something we have to watch carefully. It's hard to know for sure how much tightening is needed."
⑤George used to be seen as a hawkish commissioner, but lately she has become more of a centrist. As a voting member in 2022, she sees no need to raise rates more than previously suggested.
⑥ "I think 50 basis points is a reassuring level," George said. “The balance sheet reduction plan will help to tighten policy. “We should act cautiously, make sure the impact of rate hikes is reflected in the economy, and then see how things develop, that will be my real focus. "
⑦ She said, "What's more important to me is when we will see inflation stabilize and then decelerate, which will tell us what monetary policy measures are needed."
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