Asian Open: Volatility Erupts as US Inflation Hits a Multi-Decade High
Asian Futures:
- Australia's ASX 200 futures are down -9 points (-0.12%), the cash market is currently estimated to open at 7,414.90
- Japan's Nikkei 225 futures are down -30 points (-0.1%), the cash market is currently estimated to open at 29,076.78
- Hong Kong's Hang Seng futures are down -191 points (-0.76%), the cash market is currently estimated to open at 24,805.14
- China's A50 Index futures are down -48 points (-0.31%), the cash market is currently estimated to open at 15,311.10
UK and Europe:
- UK's FTSE 100 index rose 66.11 points (0.91%) to close at 7,340.15
- Europe'sEuro STOXX 50 index rose 4.19 points (0.1%) to close at 4,348.82
- Germany's DAX index rose 27.36 points (0.17%) to close at 16,067.83
- France's CAC 40 index rose 1.89 points (0.03%) to close at 7,045.16
Wednesday US Close:
- The Dow Jones Industrial fell -240.04 points (-0.66%) to close at 36,079.94
- The S&P 500 index fell -38.54 points (-0.83%) to close at 4,646.71
- The Nasdaq 100 index fell -234.363 points (-1.44%) to close at 15,985.57
Indices: Sea of red for equities in the face of rising inflation
It was a volatile session overnight as US inflation raged as many feared it would. US CPI rose to its highest level since 1990 at a rate of 6.2%. Core CPI (less food and energy) rose by 4.6% and it’s worth noting the monthly change of the annual rate has increased by +2 standard deviations 4 of its past 6 months. You don’t see that very often. In fact, the past time the ‘les volatile’ core CPI monthly change was this volatile was in the early 80’s.
The Fed subtly changed their take on inflation to be “expected” to be transitory (as opposed to just “transitory”) which give them some wriggle room until next year with overshooting prices. And on Monday’s, the Fed’s Evans also said they’d have a clearer idea on inflation by spring although raised the prospects of a hike in 2022. Yet with prints like this, markets are leaning towards a sooner hike than Fed speak currently allows, with Fed futures pricing in around a 49% chance of a hike in June, up from 42% the day prior.
Wall Street took notice. The VIX (volatility index) rose to a 1-month high of 19.9, the S&P 500 fell -0.8% although tech stock bore the brunt with the Nasdaq 100 falling -1.4%. In fact, all major indices and sectors were in the red, along with futures markets, which suggests a weak open in Asia today.
As for the ASX 200, futures dipped below 7400 overnight and the index almost perfectly respected the upper bound of the support zone tweeted yesterday. That zone remains a key area today, although it could get particularly interesting below 7382 given the lack of trading activity beneath that level.
ASX 200: 7423.9 (-0.14%), 10 November 2021 Outperformers: Underperformers: The US dollar was up across the board, against developed and emerging currencies. USD/ZAR rose 2.7%, USD/NOK is up 1.7% and USD/MXN up 1.5%. Oh, and USD/TRY hit a new record high. AUD/USD has fallen to the 0.7316 / 23 support zone ahead of Australian employment at 11:30 AEDT. It’s hard to image employment will be a huge driver for the Aussie today given the narrative is all about the US dollar and inflation. NZD/USD is firmly below 0.7100 at an 18-month low. But given its 50 bps base rate ad hawkish RBNZ, we do not want this in our bearish watchlist. USD/JPY was the biggest gainer of the day, breaking firmly back above the 113.00 - 133.17 resistance zone and close to testing 114.0. With yields likely to move higher then USD/JPY could find itself back at the October 2018 high sooner than later. A chart that has caught our eye for a potential bullish setup is USD/CAD. On 5th November we outlined a potential basing pattern on the pairs ahead of NFP and it looks like it may now be ready to break higher. A bullish engulfing candle formed on the daily chart and closed at the upper bound of a small bullish channel and key resistance at the 1.2500 handle. If we see a clean break higher our bias remains bullish above the monthly pivot point. Gold’s breakout did not disappoint. It made light work of breaking above the 1834.14 resistance level and its rally promptly stopped just shy of our 1870 target. Profit-taking likely sent it back to 1840 but prices are now stabilising around 1850 ahead of the open. A key level for bulls to defend is 1834, although traders with a longer time-horizon. Copper, however, is not happy with recent developments and is close to testing the 4.27 swing low. A clear break beneath here invalidates the bullish bias but we’re happy to step aside given the unfavourable direction and volatility. You can trade easily trade with City Index by using these four easy steps: ASX 200 Market Internals:
Forex: The mighty dollar roars
Commodities: Gold makes light work of its breakout
Up Next (Times in AEDT)
How to trade with City Index
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
City Index is a trading name of StoneX Financial Pty Ltd.
The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.
While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.
StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.
It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.
StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.
© City Index 2024