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Market News 【Market Morning】Gold reclaim the key $1,800 mark, Stocks close lower, Oil prices end lower

【Market Morning】Gold reclaim the key $1,800 mark, Stocks close lower, Oil prices end lower

Dollar drops with US yields, euro buoyed as ECB trims emergency support; Stocks close lower as concerns loom over growth and Covid-19.

TOPONE Markets Analyst
2021-09-10
524

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Yesterday Market Review


Gold reclaim the key $1,800 mark


Gold price finished higher on Thursday, after spending much of the session seesawing between gains and losses, as investors weighed a drop in weekly U.S. jobless claims to their lowest since the pandemic began and news that the European Central Bank will slow asset purchases.


The precious metal’s “battle to retake $1,800 and hold it [is] not a sign of strength,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. Gold wavered between losses and gains throughout the session.


“Jobless claims and, more importantly, continuing jobless claims ticking down is positive sign for labor markets,” he said, adding that the data did get some attention from gold market.


Spot gold price tacked on $6.50, or 0.4%, to settle at $1,800 an ounce, Spot silver settling at $24.18 an ounce, up 12 cents, or 0.5%.


The yellow metal scored a slight haven bid late Wednesday after the release of the Federal Reserve’s Beige Book indicated that economic growth was slowing amid the spread of the delta variant of COVID-19.


“If dollar resilience becomes the theme for the rest of the week, gold could see sellers take price down to the $1,750 level,” warned Moya. On Thursday, the ICE U.S. Dollar Index DXY, 0.02% was down 0.2% at 92.457, though up by 0.5% in the week to date.


Data released from the Labor Department Thursday showed Initial jobless claims fell by 35,000 to 310,000 in the week ending Sept. 4. That’s the fewest claims since the pandemic struck in March 2020.


Employment data has become a key measure of investors bets on the pace of the U.S.’s recovery from the COVID pandemic, with the Fed setting the stage for the eventual reduction of accommodative measures that were put in place to provide much-needed liquidity to financial markets at the height of the distress caused by the deadly pathogen. However, those measures are viewed by a number of Fed officials as no longer needed.


Dollar drops with US yields


The dollar dipped on Thursday as Treasury yields fell after the U.S. government saw strong demand for a sale of 30-year bonds, while the euro was supported after the European Central Bank said it would trim emergency bond purchases over the coming quarter.

The dollar index dropped 0.23% to 92.47, up from a one-month low of 91.94 on Friday.


Investors are focused on when the Federal Reserve is likely to begin paring bond purchases as it balances rising price pressures against a still relatively soft employment picture.


Chicago Federal Reserve President Charles Evans on Thursday said the U.S. economy is “not out of the woods yet,” and that despite strong economic growth and the promise of vaccines, challenges remain, including supply chain and labor market bottlenecks.


Fed Governor Michelle Bowman, meanwhile, added her voice to the growing number of policymakers who say the weak August jobs report likely won’t throw off the central bank’s plan to trim its $120 billion in monthly bond purchases later this year.


Data on Thursday showed that the number of Americans filing new claims for jobless benefits fell last week to the lowest level in nearly 18 months, offering more evidence that job growth was being hindered by labor shortages rather than cooling demand for workers.


The euro was also supported after the ECB maintained a dovish tone and offered no major surprises as it took a first small step toward unwinding the emergency aid that has propped up the euro zone economy during the pandemic.


In the past two quarters, the bank has purchased around 80 billion euros worth of debt each month. It provided no numerical guidance for the three months ahead, but analysts had predicted before the meeting that purchases would fall to between 60 billion and 70 billion euros in those months.


“The ECB is delivering mainly as expected today,” analysts at TD Securities said in a report. “Looking ahead, the focus will be on how the ECB defines “moderately” - anything less than €60bn/mo could be bearish.”


The euro gained 0.11% on the day to $1.1828.


Oil price ended lower


Crude oil price ended lower Thursday, pressured by reports that China plans a release from its crude-oil reserve, in a move to ease commodity inflation.


China plans to auction off oil from its reserve in phases, Reuters reported, citing a statement from China’s National Food and Strategic Reserves administration, which didn’t specify the amount of crude it would put up for sale.


West Texas Intermediate crude oil price fell $1.16, or 1.7%, to settle at $68.14 a barrel and Brent crude oil price declined by $1.15, or 1.6%, at $71.45 a barrel.


“This is the first officially announced release from the strategic petroleum reserve in China ever,” said Flynn. “China has been building a reserve for many years, but it is clear that they are very concerned about tight supplies and rising prices and inflation.”


“China using the strategic petroleum reserve to try to manipulate prices may work in the short run,” he said. It may also “not work in the long run [as] trying to cool off oil demand by artificially lowering prices at a time when demand is growing is only going to encourage more demand — hence tighter supplies and in the long run, higher prices.”


Production issues in the Gulf of Mexico are still significant, and the market has already seen a much bigger-than-expected drawdown in gasoline supplies so “that’s going to keep the market supported,” said Flynn.


Meanwhile, there appears to be no end to the reports of supply outages, said Carsten Fritsch, analyst at Commerzbank, in a note.


The U.S. Bureau of Safety and Environmental Enforcement late Thursday estimated 76.48% of oil and 77.25% natural-gas production in the Gulf of Mexico remains shut in. Hurricane Ida, a deadly and powerful storm, made landfall on the Louisiana Gulf Coast on Aug. 29, also forcing the closure of refineries, several of which have reopened.


The Gulf closures equate to a daily production loss of 1.4 million barrels, Fritsch said, noting that it is “still taking production considerably longer to normalize again after Hurricane Ida than it did after Hurricane Katrina 16 years ago, when 40% of production had already been restored by this time.”


Meanwhile, production from the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, raised their collective crude production by 50,000 barrels a day in August, according to an S&P Global Platts survey released Thursday.


On Thursday, the Energy Information Administration reported that U.S. crude inventories fell by 1.5 million barrels for the week ended Sept. 3.


Dow falls for the fourth straight day, drops 150 points


The Dow Jones Industrial Average fell more than 150 points on Thursday, the 30-stock average’s fourth day of losses.


The Dow Jones Industrial average lost 151.69 points to close at 34,879.38, dragged down by Amgen and Merck. The S&P 500 fell 0.46% to 4,493.28, dropping for the fourth straight day. The technology-heavy Nasdaq Composite dropped 0.25% to 15,248.25. All three major averages are headed for losses this week.


Moderna shares rose more than 7.8% after the drug maker said it’s developing a single dose vaccine that combines boosters against Covid and the flu.


Meme-favorite GameStop closed in the green after dropping as much as 10.5%. The video-game retailer posted a narrower loss compared with the year prior but did not provide an outlook or grander turnaround plans.


Boston Beer fell 3.8% after pulling its earnings guidance amid slowing growth in its hard seltzer brand.


Shares of athletic retailer Lululemon surged 10.5% and furniture retailer RH rose 7.8% on the back of better-than-expected earnings. Lululemon also offered a stronger-than-forecast outlook for the third quarter and the year.

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