European Open: Is gold building up towards its next leg higher?

Asian Indices:

• Australia's ASX 200 index rose by 41.4 points (0.59%) and currently trades at 7,073.90
• Japan's Nikkei 225 index has risen by 337.02 points (1.18%) and currently trades at 28,884.00
• Hong Kong's Hang Seng index has fallen by -56.83 points (-0.28%) and currently trades at 20,118.79
• China's A50 Index has fallen by -39.7 points (-0.29%) and currently trades at 13,669.68

UK and Europe:

• UK's FTSE 100 futures are currently up 38.5 points (0.51%), the cash market is currently estimated to open at 7,539.39
• Euro STOXX 50 futures are currently up 15 points (0.4%), the cash market is currently estimated to open at 3,791.81
• Germany's DAX futures are currently up 45 points (0.33%), the cash market is currently estimated to open at 13,840.85

US Futures:

• DJI futures are currently down -64 points (-0.19%)
• S&P 500 futures are currently down -33 points (-0.24%)
• Nasdaq 100 futures are currently down -9.25 points (-0.22%)

Weak data prompts PBOC to cut interest rates

A host of weak data for China weighed on their share markets overnight, seeing the China A50 and Hang Seng hand back earlier gains and trade around -0.1% from Friday’s close. Retail sales fell to 2.7% y/y (3.1% previously), or down -0.21% YTD. House prices contracted -0.9% y/y whilst industrial output and urban investments also softened. The PBOC (People’s Bank of China) also surprised traders with an interest rate cut.

Economists favour 50bp BOE hike next month

59% of economists polled by Reuters expect the BOE (Bank of England) to hike interest rates by 50bp at their next meeting, before slowing down to 25bp increments thereafter. And this is despite the BOE’s own admission that they expect the UK economy to print 5 consecutive quarters of GDP and remain in a recession until 2024.

Gold 4-hour chart:

Gold is within a clear uptrend on the 4-hour chart and shows the potential to break higher, having established support around 1783. The 50-bar eMA has crossed above the 200-bar eMA and prices look set to break above the 1783 – 1800 range. The initial target for bulls is around the monthly R1 pivot / 1820, a break above which brings 1840 into focus.

FTSE 350 – Market Internals:

FTSE 350: 4184.46 (0.47%) 12 August 2022

• 199 (56.86%) stocks advanced and 131 (37.43%) declined
• 5 stocks rose to a new 52-week high, 2 fell to new lows
• 39.43% of stocks closed above their 200-day average
• 80% of stocks closed above their 50-day average
• 17.43% of stocks closed above their 20-day average

Outperformers:

• + 14.10% - Flutter Entertainment PLC (FLTRF.L)
• + 11.22% - Mondi PLC (MNDI.L)
• + 6.73% - TBC Bank Group PLC (TBCG.L)

Underperformers:

• -10.81% - 888 Holdings PLC (888.L)
• -3.85% - QinetiQ Group PLC (QQ.L)
• -3.81% - Syncona Ltd (SYNCS.L)

Economic events up next (Times in BST)

German wholesale prices remain a key inflationary input and rose over 20% despite coming in softer over the past two months. Today’s report at 07:00 BST will reveal if it can soften further.

US homes builder confidence is released at 15:00. Whilst not a widely followed indicator, its importance has only increased as interest rates have risen. At 55, it sits at its most pessimistic level since the pandemic and the report also sheds light on expected future sales.

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