When high-growth stocks stumble, the market reaction can be brutal. And there’s plenty more to come, says John Stepek.
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Saturday, June 4, 2022
Friday, June 3, 2022
Solid NFP – Not Too Hot & Not Too Cold
US nonfarm payrolls increased 390k in May following gains of 436k (was 428k) in April and 398k (was 428k) in March, for a net -22k 2-month revision. The unemployment rate was steady at 3.6% for a third straight month.
Average hourly earnings were up another 0.3%, the same as April. The 12-month rate slowed to 5.2% y/y from 5.5% y/y. The average workweek was unchanged at 34.6 hours for a third month. Household employment bounced 321k after dropping -353k in April, while the labor force rose 330k following the prior -363k drop. The labor market participation rate ticked up to 62.3% from 62.2%.
Total private payrolls increased 333k after rising 405k previously (ADP was 128k). Employment in the service sector jumped 274k while the goods producers added 59k. Manufacturing payrolls added 18k, while leisure/hospitality increased 84k. Business services added 75k. There was a -61k decline in retail trade jobs. Government jobs climbed 57k. Overall it is a solid report, not too hot and not too cold.
Click here to access our Economic Calendar
Andria Pichidi
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.
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Events to Look Out for Next Week
- Consumer Price Index (CNY, GMT 01:30) – May’s Chinese CPI is expected to grow by 1.8% from 2.1% on a yearly basis.
- Consumer Price Index (USD, GMT 12:30) – May’s CPI is anticipated to gain by 0.6% for the headline and 0.4% for the core, following gains of 0.3% and 0.6% respectively in March. CPI gasoline prices look poised to rise 4% in May, after an April energy price pullback that trimmed the huge March gains with the war in Ukraine. We see ongoing support for core prices from the lockdowns in Shanghai and the associated disruption to global trade. As-expected May CPI figures would result in an 8.1% y/y increase, following 8.3% in April and March’s 40-year high of 8.5%. Core prices should rise 5.8%, from 6.2% in April and March’s 40-year high y/y gain of 6.5%. Respective May PCE y/y chain price gains of 6.3% and 4.7% will sustain pressure on the Fed to rapidly remove policy accommodation.
- Unemployment Rate (CAD, GMT 12:30) – Canada’s employment rose 336.6k in February following the -200.1k fall in January, as Covid faded and business reopened. The rise was larger than expected. The jobless rate fell to 5.5% from 6.5%. The Canadian employment change for May is expected to rise by 55k from the disappointing 15.3k in April.
Click here to access our Economic Calendar
Andria Pichidi
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
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Share tips of the week – 3 June
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
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Investment Bank Outlook 03-06-2022
CitiEuropean openPost European close, a bounce in equities in the US session caused USD to retrace lower and erase most of Wednesday’s gains. With several countries on holiday today, and the NFP looming, markets have reverted to being fairly muted in Asia. USTs saw several block trades again today, while oil prices remained steady after yesterday’s move higher. CNH spiked higher early in Asia as technical levels gave way amidst low liquidity. KRW opened higher, tracking yesterday’s moves overnight. KRW’s CPI print exceeded consensus, but markets had been expecting high inflation prints, and hence markets were little affected.Looking ahead, NFP will remain the highlight of the day, although the US also sees ISM services index and Fedspeak from Brainard. EUR sees a set of economic data, while CAD receives labor productivity prints. TRY will eye a CPI, while BRL receives IP figures. We flag that liquidity may be low in this session with GBP, CNY, HKD, TWD & THB observing holidays.US & the big payrolls USD looks for payrolls data today, with markets calm ahead of it. Change in Nonfarm Payrolls at 13:30 BST for May. Citi Economics provides their NFP Preview – Will labor demand or supply slow job growth first? They expect 315k jobs added in May and notes that other elements of the report, including the unemployment rate falling to 3.4% and average hourly earnings rising 0.5%MoM, should affirm that slower job growth is a result of constrained supply of workers as opposed to softer labor demand.– CitiFX Strategy asks if the payroll can stop equities – They believe an overshoot for both wages and jobs would likely weigh on equities, similar to how markets reacted to US ISM Mfg earlier this week. In that scenario, we would expect the USD to strengthen, even though Dollar performance on the day given AHE surprises has been mixed since 2021. Ahead, we will also look to ISM Services Index at 15:00 BST for May. Citi Economics expect the index to decline to 56.4 in May. This would be a still-solid level of the index and would be consistent with recent months showing a stabilization in services ISM around pre-pandemic levels. We will also see Fed Vice Chair Brainard Discusses Community Reinvestment Act at 15:30 BST.What happened in markets?Equities: S&P 500 closed +1.8% at 4176 and Nasdaq Composite was +2.7% at 12320. S&P eminis traded above 4150 and is approaching the next notable resistance level at 4202. CitiFX Technicals says that a break there could suggest an extension to the double bottom target at 4303 (May 2022 high). The Asian session equities maintained gains - Nikkei was up 1.13%, while Kospi and US futures were relatively flat.Oil – a recapOil prices soared towards the end of the European session yesterday, despite the OPEC+ decision to raise production targets by 648,000 bpd for July and August. The OPEC+ producers ability to fully match the 648,000 bpd increase in production targets for July and August was doubted however, and concerns of the market being left with limited supply ultimately resulted in the price increase.
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Copper rebounds as China reopens
Today the price of Copper rebounded strongly with an increase of 5.24% thanks to the recovery by China after ending the 2-month lockdowns due to its zero-covid strategy, giving hope to the demand for the metal. In addition, officials announced this week a package of measures to reactivate the pandemic-stricken economy.
On the other hand, the metal has also production problems for various reasons, such as the difficulties in the supply chain due to Covid, extreme weather conditions, high costs due to inflation thanks to the Russia-Ukraine war and even production problems in the main countries of extraction.
Chile, which is the number one copper producing country with more than 25%, had a decrease of 9.8% y/y in production in April after the state productions of the Codelco, La Escondida (the largest deposit in the world) and Collahuasi mines fell, the 1st by 6.1% with 16,000 tons, the 2nd by 2.6% with 88,000 tons and the last by 26.5% with 42,000 tons. In addition, the Los Pelambres de Antofagasta mine faces a penalty for mismanagement of tailings.
Peru, which is the second largest producer of the metal, has paused production due to violent community protests against mining. Said protests have given rise to fires in two key mines, Las Bambas, where production was paralyzed for 42 days, and Los Chancas. Currently there is no exact calculation of damages.
Technical analysis
On a monthly basis, the price of copper is rising after it closed with a Hammer candle in May, testing the 20-month SMA. Since 2021, the price has been within a wide range of 4,000-4,730 excluding candle wicks and made historical highs at 5.0340.
On a weekly basis, the price is for a 3rd week on the upside, breaking the 50 and 20-period SMAs. The year’s highs its the next key resistance at 4.73. The 100-period SMA is at 4.0000.
Lastly, on a daily basis, price momentum on Thursday recovered over 60% of its April-May decline, breaking the 200, 50 and 100 SMAs to close above them and break above the 4.5000 level. The OB terittory is at the 88.6% Fibo level at 4.7452, while if it exceeds the previous high at 4.8370, it would be looking to test historical highs. Current lows are at 4.0320. The 20-period SMA is at 4.2579.
https://es-us.vida-estilo.yahoo.com/producci%C3%B3n-minas-chilenas-cobre-cierra-144907641.html
https://es-us.vida-estilo.yahoo.com/menor-producci%C3%B3n-cobre-chile-enfatiza-162915758.html
https://www.miningweekly.com/article/chile-starts-sanction-process-against-los-pelambres-copper-mine-2022-06-02
https://www.americaeconomia.com/las-bambas-incendio-tension-comunidades
https://www.americaeconomia.com/minas-cobre-chile-produccion-dispar
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Market Update – June 3 – Wild Swings Continued
Trading is rather directionless this morning in the lead up to the jobs data. USD moved lower (USDIndex 101.70). Stocks extended gains overnight (NASDAQ +2.69%) and Treasuries bounced from red to green and back again. Asian markets managed pretty broad gains, with tech stocks still outperforming after they led yesterday’s rally on Wall Street (Nikkei +1.2%, ASX +0.9%) with China & HK closed today. European FUTS are lower (Italy, Spain & France closed & UK closed until Monday). Treasury announced a $96 bln package of coupon auctions for next week. Yesterday’s data showed strength in jobless claims and weakness in ADP private payrolls and factory orders.
- USDIndex pulled back to 101.70, reverting all the gains from Wednesday.
- Equities – USA500 (+1.84%) at 4189, while the USA30 was 1.33% firmer. The GER40 future is up 0.8% while US futures are looking more cautious as key US payroll numbers come into view.
- Yields 10-year rate was up 0.5 bps to 2.91%, with the 2-year 0.2 bps lower at 2.64%.
- Oil – USOil spiked to $116.27 before correcting to $114.60 now, following the bullish EIA inventory report that overshadowed the boost in production announced by OPEC+ in July and August, only to tumble on reports OPEC+ was considering excluding Russia from production quotas which suggested increased output from Saudi and the UAE to make up for the loss.
- Gold rallied to $1874.
- Bitcoin back above $30k.
- FX markets – USDIndex is slightly lower, EURUSD managed to move up to 1.0755, USDJPY is still holding close to 130.00, Cable is at 1.2574.
NOTE: NFP is unlikely to make any difference in terms of the Fed – but the labor market into Q3 will be an important determinant for the FOMC. Meanwhile, the markets continue to vacillate on risk-on, risk-off flows, and waver on inflation/growth uncertainties, as well as the outlook for the responses from key central banks, while volatility in energy and the ongoing distortions from supply chains also continue to impact.
Today – EU Retail Sales, US NFP, ISM Services PMI and Speech from Biden.
Biggest FX Mover @ (06:30 GMT) Cocoa (-1.55%) dipped to 50-period SMA at 2740 from 2537. MAs aligning lower, MACD lines decline but hold above 0, RSI 46 but pointing higher, H1 ATR 19.07, Daily ATR 51.92.
Click here to access our Economic Calendar
Andria Pichidi
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.
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Incoming US Economic Data Hints the Fed will not Bend to Bearish Market Sentiment
A raft of US economic data for the first quarter, including surprising quarterly decline in GDP, sowed the seed of doubt in the market that the economy could withstand a series of aggressive Fed rate hikes and not slide into recession. However, incoming data for the second quarter consistently rebutted these fears, which helped risk assets to stabilize and Treasury yields to rise again, reflecting decline in demand for defensive assets. The US labor market remains in good shape, households maintain a solid pace of consumption, and the difficulties faced by the US manufacturing sector and construction were not as serious as previously thought.Yesterday's JOLTS report highlighted that the gap between labor demand and supply remained wide in May, so if Friday's NFP report points to weak job growth in May, markets could again attribute it to problems matching labor supply to demand rather than to weakening demand for labor force. As a result, the focus will once again be on wages as the main proxy for the dynamics of consumer income and, consequently, consumer spending. The latter indicator directly affects consumer inflation. The number of open vacancies, according to the report, decreased from 11.855 to 11.4 million (consensus 11.35 million):However, given the number of unemployed, this means that there are two vacancies for every unemployed American. For comparison, in the UK there is one vacancy per unemployed person, and in Germany - only 0.4.One of the leading indicators of shortages in the US labor market is the rotation of the labor force, i.e. the rate of layoffs, remained at a fairly high level for the third month in a row - 2.9%. This indicator is one of the key proxies of the bargaining power of employees, which directly affects the dynamics of wages.The continued deficit in the labor market provides upward pressure on wages. As it is one of the main pro-inflationary factors, inflation is expected to remain robust and slowly return to the Fed's 2% target. As a result, the chances that the Fed will change its rhetoric remain low. At the same time, this cannot be said for the central banks of the European continent, where imports remain the main factor in inflation, and a too aggressive pace of policy tightening could provide a critical mass for a recession.US manufacturing data beat expectations, with the ISM unexpectedly up from 55.4 to 56.1 (consensus 54.5). There were expectations in the market that weak data on the Chinese economy and an ambiguous picture given by regional indices would most likely lead to a decrease in the ISM index, however, the details showed that the index of new orders unexpectedly rose (from 53.5 to 55.1 points), as well as the index of production (from 53.6 to 54.2 points). The rest of the sub-indices indicated that inflationary pressures remain in supply chains.With Chinese manufacturing activity indexes leading the US ISM indices, the easing of lockdown restrictions in China raises the possibility of a positive surprise in US data in the coming months.
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The unintended consequences of ESG
ESG is the fastest growing corner of the asset management industry. But Merryn-Somerset Webb explains how neglecting fossil fuels is causing unintended consequences.
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Thursday, June 2, 2022
Platinum Futures (PL1!), H1 Potential for Bullish Rise
Type: Bullish RiseKey Levels:Resistance: 1026.3Pivot: 1000.5Support: 988.0Preferred Case:Price is moving within the ascending trend channel and is moving above the ichimoku cloud which supports our bullish bias that price will rise from the pivot at 1000.5 where the pullback support is to the 1st resistance at 1026.3 in line with the swing high resistance.Alternative Scenario:Alternatively, price may break pivot structure and drop to the 1st support at 988.0 in line with the swing low support.Fundamentals:Due to increasing inflation rates in the US,UK and other developed economies, we have a bullish view on the precious metal.
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CRUDE OIL FUTURES (CRUDEOIL1!), H1 Potential For Bearish Drop
Type: Bearish MomentumKey Levels:Resistance: 8886Pivot: 8788Support: 8454Preferred Case:On the H1, price is moving below the ichimoku cloud and breaking from the ascending channel which supports bearish bias that price will drop from our pivot at 8788 in line with the pullback resistance to the 1st support at 8454 in line with the swing low support, 161.8% fibonacci extension and 78.6% fibonacci retracement .Alternative Scenario:Alternatively, price may break through pivot structure and rise to the 1st resistance level at 8886 in line with the pullback resistance.Fundamentals:Due to the Russian-Ukraine invasion and a shortage of oil shipments from Russia, oil prices are projected to continue to increase. As a result, we've adopted a bullish stance.
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The best current account switch deals
Banks are offering attractive cash incentives to entice new customers, but Ruth-Jackson Kirby explains why it’s important to read the small print before you move.
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Market Update – June 2 – USD Ticks Higher, Stocks Slip Yields Firmer
USD moved higher (USDIndex 102.43) Stocks had a weak US session (NASDAQ -0.72%) and Yields rallied to 2.931%. Asian markets followed US lower (Nikkei -0.16%, Hang Seng -1.10%) with China closed today. European FUTS are lower (Italy, Spain & France closed & UK closed until Monday). Central bank outlooks and China’s virus lockdowns remain in focus (Shanghai open but zero policy still in place) amid concern that aggressive monetary policy tightening will weigh on growth outlook. BOC increased rates by 50bp & Bullard remained very hawkish, both expected. Oil prices bounced ahead of OPEC+ today – Saudi Arabia ready to boost output should Russian production fall.
- USDIndex rallied to 102.72 from 101.28 & one-month lows on Monday. Back to 102.40 now.
- Equities – USA500 -31 (-0.75%) at 4101, US500FUTS at 4100 now. Walmart & Meta -2.49% (Sheryl Sandberg to leave Meta after 14 yrs as COO)
- Yields 10-year yield higher (2.931% at close), trades at 2.91% now.
- Oil & Gold had mixed sessions – USOil sank to $111.60 before correcting to $113 now following SA news ahead of OPEC+ meeting, Gold rallied over $1850 to $1852 from $1830 yesterday.
- Bitcoin slipped back under $30K after 3-day move north. Trades at $29.8K now.
- FX markets – EURUSD down under 1.0700 again to 1.0670, USDJPY breaks over 130.00, Cable trades at 1.2500, from 1.2450 yesterday.
Overnight – AUD Trade Balance significantly better than expected.
Today – ADP Employment, Weekly Claims, Weekly Oil Inventories, OPEC+ Meeting, Speeches from Mester NY Fed’s Logan.
Biggest FX Mover @ (06:30 GMT) USDCHF (-0.54%) A surprise spike in Swiss CPI puts pressure on SNB to act. Pair dived from 0.9640 to 0.9575. MAs aligning lower, MACD histogram negative & breaks 0 line, RSI 35 & falling, H1 ATR 0.0013, Daily ATR 0.0070.
Click here to access our Economic Calendar
Stuart Cowell
Head Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.
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Investment Bank Outlook 02-06-2022
CIBCFX FlowsNew Zealand first quarter terms of trade rose 0.5% over the quarter against estimates of +1.3%. Slight improvement in the previous quarter to -0.9% from -1.0%. Stats New Zealand said export volume fell 7% while import volume fell 2.6%. Little change in the NZ$. Intraday resistance 0.6568 and support around 0.6425. Small option expiry at 0.6500 for NZ$375mio, there is a put strike at 0.6445 due Tuesday for NZ$545mio. Rather muted price action since, we saw a small spike to 0.6488 which was caused by AU$NZ$ but no drama.According to FT, Saudi Arabia indicated to western allies that it is prepared to raise oil production if Russia’s output falls substantially under sanctions. Fears of outright supply shortages have risen after EU launched another round of sanctions which included seaborne cargoes. Oil futures fell, August contract slipped under $109.50 from $111.00. $CAD rose to 1.26745 where we encountered some offers.In our FX Weekly, Bipan wrote it was not surprising that the BoC delivered 50 bps hike, taking the overnight rate to 1.50%. BoC voiced more concern with respect to inflation and that the risk of inflation becoming entrenched had risen. Statement flagged that Canada is now operating in an environment of excess demand – which implies that the output gap is now fully closed. Of course, this necessitates additional rate hikes to bring inflation back to target, and a signal that the Bank could act more forcefully if needed to do so. At the April MPR, Governor Macklem repeatedly mentioned that he saw the policy rate rising to neutral, which the Bank gauges to be around 2.50%. Whether there’s a need for that rate to rise above that level is the question that many will be looking at in the coming months.On the BoC, our economics team sees another 50 bps hike in July, our forecast that we’ll see signs of a growth deceleration by early fall, allowing the BoC to slow to a 25 bps hike in September, and then a pause before a final quarter point to 2.5% in early 2023. $CAD got down to 1.2609 then bounced back up. Our trader Jon believed it was more a US$ move, hawkish comments from Fed speakers Daly, Bullard and Barkin. Bipan said in the near-term, $CAD should keep in the 1.25-1.30 range and in the long-term, the risks are still skewed towards a break higher out of that range.Australia April trade surplus widened to A$10.495bn against consensus of A$9bn. AU$ didn’t benefit from the data, slightly lower from where North America ended. Resistance near the 100-day SMA 0.7229, first support at 0.7150 then 0.7127. Small downside strikes due today, A$430mio at 0.7140 and A$330mio at 0.7100. Keep an eye on the daily charts, potentially a second Death Cross could develop.Fed-BoJ policy divergence back in play, looks like we are likely to tackle the 20-year high soon. After an initial move to 129.89, $YEN came back bid as UST yields rose. Japanese retail traders have all taken profit and some have begun short position. I believe they will add towards previous high 131.35. Strikes at 132.00 for $1.06bn due today.Dull day for EUR$, we have been in this 1.06455-585 since I sat down. Fresh offers noted above 1.0660 which limited the bounce off low 1.0627. Intraday support around 1.0640/42 but think we will extend towards 1.0607. ECB speakers today are Villeroy and de Cos in Paris. Expect some hawkish remarks.Former Bank of England MPC member Andrew Sentance wrote in The Times that the Bank should raise interest rates to 3% next year. He argued that the Bank need to aggressively accelerate pace of monetary tightening to contain inflation pressures. BoE raised rates to 1.0% last month but Sentance said the Bank’s slow response has caused a mismatch between rates and inflation that leaves the economy’s real rate in negative. GBP$ little lower, support at 1.2472 the 38.2%. Decent strike at 1.2450 but this matures next week.CitiEuropean OpenPost the UST bear flattening towards the end of the European session yesterday, markets were relatively calm, and Asian FX volumes slumped 25% compared to 30d averages. G10 FX kept within a tight range to the dollar and UST yields were up just a touch in Asia. Oil prices dipped on the back of an FT report that Saudi Arabia has indicated it is prepared to raise oil production if Russia’s output falls substantially, while equity held steady. USDKRW was up sharply, mostly on a higher open, while USDIDR saw a test of the 14500 support.Ahead, we expect volumes to be light with GBP on a long weekend starting today. USD will listen to Fedspeak today and await initial jobless & continuing claims prior to NFP on Friday. CAD will eye the Economic Progress Report Speech which will be closely watched after yesterday’s hawkish messaging. EUR looks to guidance from ECB speakers ahead of the quiet speaker, while SEK listens to Riksbank speakers. HUF gets their One-Week Deposit Rate, where Citi Economics predicts a hike of 20bps to 6.65%. BRL eyes GDP figures. Lastly, we flag that OPEC+ is likely to stick to a planned 432k bpd increase in oil production in their meet today.
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