Noticias del mercado & perspectivas

Where’s the Federal Reserve at? Slowing Growth and Potential Rate Cuts: Recent economic data suggests a slowdown in growth, contrary to earlier expectations of reaccelerating growth and inflation. Federal Reserve Chairman Jerome Powell's statements and recent economic indicators point towards the possibility of lower policy rates in the near future.

Key indicators, such as the softening in job markets and overall economic activity, indicate that growth is decelerating rather than accelerating. Core inflation remains above the Fed's target but is showing signs of a gradual decline, with core CPI at 0.29% month-over-month (MoM) in April. This trend could build the Fed's confidence that inflation is on a downward trajectory, potentially leading to rate cuts starting in July.

These data trends have filtered into in the market itself. The divergence between the S&P and US 2-year has been come very apparent as yields unwind from their hawkish bets that ramped up on Q1 data. That spread is becoming an interesting trade – it could close as fast as it has opened if data misses.

On the data – what is core to the Fed’s view? Inflation Trends: Core inflation remains elevated but shows signs of slowing. The April core CPI increase of 0.29% MoM aligns with the Fed's expectations of gradual inflation decline.

The slow but steady decrease in shelter prices, particularly the owner’s equivalent rent (OER), is a positive sign. However, the "supercore" non-shelter services sector's inflation is unlikely to slow significantly without a loosening of the labour market and that remains a headwind. That brings us to the next question what is the official views of the Fed?

Federal Reserve Outlook: The recent Federal Open Market Committee (FOMC) minutes and statements from Fed officials suggest it still holds a cautious approach. While there is no major shift towards a hawkish stance, the rhetoric indicates a readiness to cut rates if inflation data supports a premise it’s on a path to a more sustainable level. Yet the view from members is rather mixed, illustrated by the mixed views from members over the past week.

Key Statements Vice Chair Philip Jefferson: Jefferson noted that while April's data is encouraging, it is too early to determine if the slowdown in inflation is sustainable. He emphasized the current restrictive monetary policy and refrained from predicting when rate cuts might begin, stressing the importance of assessing incoming economic data and the balance of risks. Vice Chair of Supervision Michael Barr: Barr expressed disappointment with Q1 inflation readings, which did not increase his confidence in easing monetary policy.

He reinforced the message that rate cuts are on hold until there's clear evidence that inflation will return to the 2% target. Cleveland Fed President Loretta Mester: Mester anticipates a gradual decline in inflation this year but acknowledges that it will be slower than expected. She no longer expects three rate cuts this year and mentioned that the Fed is prepared to hold rates steady or raise them if inflation does not improve as anticipated.

San Francisco Fed President Mary Daly: Daly sees no need for rate hikes but also lacks confidence that inflation is decreasing towards 2%. She sees no urgency to cut rates, echoing the broader sentiment of caution among Fed officials. The conclusion from all this is that the Fed is still giving itself time.

It’s of the view that the restrictive policy will need more time to work, suggesting a prolonged period of higher interest rates to combat inflation effectively and despite the movements in the bond market and USD. Traders in the fed fund futures are still trading a full 50 basis points higher as of now compared to their bets at the March meeting. (Black v Blue line) Other data that matters: GDP and Consumer Spending: Despite strong GDP growth in the latter half of 2023, real GDP growth slowed significantly to 1.6% annualized in Q1 2024. Final private domestic demand was sustained primarily by consumer services spending, even as real goods spending declined.

The weakening consumer spending on goods is beginning to spill over into the services sector, indicating broader consumer weakness. Manufacturing and Investment: Data on manufacturing and business investment remains weak. Manufacturing production has stagnated, and orders for durable goods have not shown significant improvement.

Residential fixed investment is also slowing, with housing starts and building permits both declining in April. Housing Market: Existing home sales data, to be released soon, is expected to show a modest rebound from the previous month. However, ongoing weakness in the housing market, influenced by higher mortgage rates, remains a concern.

Hot Copper – Too hot? Copper has experienced significant price movements, with several key factors contributing to the recent trends in copper prices, spreads, and inventory levels. The following points provide an in-depth analysis of the forces at play: Tighter Physical Copper Market: Last week's record highs in COMEX and SHFE copper prices, alongside the COMEX-LME copper spreads indicate a very tight physical copper market.

This saw the LME copper price smash a new record all-time high (above US$11,000 a tonne). The dislocation in copper price benchmarks, such as the COMEX-LME spread, typically leads to adjustments in physical flows. However, current conditions are proving challenging, with generally low copper inventories and logistical issues.

For example, traders in China are facing tight shipping schedules, making it difficult to move copper to the US. Suggesting the price will hold in the interim De-commoditisation of Commodities: Deliverable Metal Scarcity: The elevated COMEX copper prices relative to other benchmarks can be partly attributed to the lack of deliverable metal. Only 17% of the metal in LME warehouses originates from countries with COMEX-approved brands.

This scarcity of deliverable inventory means that most of the available copper cannot be used to satisfy COMEX contracts, driving up the COMEX copper premium. RIO, BHP and the like all benefit from this. Influence of Financial Flows: Naturally this kind of move brings highten investor and trader interest.

COMEX copper futures are experiencing all-time highs in long positioning and record open interest in copper options. This surge in financial flows has pushed COMEX copper prices higher compared to other benchmarks and has been more resistant to reversal. What next?

The tight inventory situation is likely to persist, especially if logistical challenges and shipping delays continue. This will maintain upward pressure on prices and could lead to further dislocations between different copper price benchmarks. Efforts to alleviate bottlenecks will be crucial in normalizing price spreads and stabilizing the market.

Any improvement in shipping schedules or inventory replenishment could ease some of the current tensions, but we do not hold our breathe for this to occur any time soon. Conclusion The recent record highs in copper prices and spreads underscore a complex interplay of tight physical markets, and significant financial flows. Traders should closely monitor these dynamics and adapt their positions to capitalise on potential switches and further squeezes.

But in the main Dr. Copper is hot and likely to remain so until supply catches up.

What is going on with Taiwan? Taiwan is back in the news after US speaker of the house Nancy Pelosi visited the country causing a fiery reaction from the mainland of China. Historical background In order to understand the causes of the China/Taiwan tension, some historical perspective is needed.

The current tension stems from the Chinese civil war 1927 – 1949 where Mao Zedong’s Communist army and Chiang Kai- Shek’s Republic of China army fought in a series of intermittent battles to secure control of mainland China. As the Communist army began to gain ascendancy, Chiang Kai–Shek and the Republic of China movement was forced into exile to Taiwan. Since this exile and lasting until today, a long-standing military and political standoff has been in place between the two countries with each claiming to be the rightful controller of China.

In recent years, China has attempted to expand its influence and places such as Hong Kong have seen Beijing challenge its sovereignty the pressure has been building on Taiwan. At times of increased tension, China has conducted military exercises in the Taiwan Strait to act as a ‘warning’ to Taiwan and the West that it may be treading too close to China’s political interests. Current Day Events Nancy Pelosi became the first US speaker of the House to visit Taiwan in more than 25 years.

The visit by Pelosi, whilst not necessarily threatening is an act that supports the legitimacy of Taiwan as a democratic, sovereign government. Pelosi challenged the essence of China’s communist regime and stated, “Today the world faces a choice between democracy and autocracy.” However, the speaker did not go as far as to offer any specific military support to protect against an aggressive response from the CCP.. Any act of economic or military support has the potential to draw an aggressive response from the CCP.

Why does this matter? Traders and investors do not have to look too far to see what can happen to the market if geopolitical conflict breaks out. It is still only a few months on since the Russia and Ukraine conflict broke out.

After the initial invasions, commodity prices soared as sanctions were placed on Russia and supply chains were placed under pressure. The market is still trying to adjust to these consequences today. In addition, the Ruble took a huge hit and Moscow Exchange had to be closed as countries placed sanctions on Russia and its monetary system.

If China was to invade Taiwan it is reasonable to expect economic sanctions will follow. With China being such a huge player in the global supply chain, it may have a larger effect on commodity prices. The Ukraine conflict showed the world how fragile global supply chains can be when conflict strikes.

Specifically, Gas, Grain, Oil rocketed in price. Regarding Taiwan and China, a large portion of the world semi- conductors are produced in Taiwan which means that there could be disastrous consequences that may ensure should war breakout. A more detailed discussion on the impact that a shortage of semiconductors may have can be found below. https://www.gomarkets.com/au/articles/economic-updates/semi-conductor-supply-crunch/ Similarly, the Yuan may take a hit with any kind of escalation in conflict.

Therefore, traders should be aware of the conflict and ongoing tensions as trading opportunities may eventuate. The USDCNH can be traded on Go Markets platforms.

Walmart tops expectations for Q2 – the stock is up Walmart Inc. (WMT) announced its Q2 financial results before the market open on Wall Street on Tuesday. World’s largest supermarket chain reported results that exceeded analyst expectations, sending the stock price higher. The company reported revenue of $152.859 billion (up by 8.4% year-over-year) vs. $150.994 billion expected.

Earnings per share reported at $1.77 per share for the quarter vs. $1.62 per share estimate. Doug McMillon, President and CEO of Walmart commented on the latest results: ''We’re pleased to see more customers choosing Walmart during this inflationary period, and we’re working hard to support them as they prioritize their spending. The actions we’ve taken to improve inventory levels in the U.S., along with a heavier mix of sales in grocery put pressure on profit margin for Q2 and our outlook for the year.

We made good progress throughout the quarter operationally to improve costs in our supply chain, and that work is ongoing. We continue to build on our strategy to expand our digital businesses, including the continued strength we see in our international markets.'' Walmart Inc. (WMT) chart The stock was up by over 6% on Tuesday, trading at $140.233 a share. Here is how the stock has performed in the past year: 1 Month +8.62% 3 Month +7.14% Year-to-date -2.74% 1 Year -6.62% Walmart price targets Deutsche Bank $142 Raymond James $140 BMO Capital $160 Cowen & Co. $150 Morgan Stanley $145 UBS $152 Credit Suisse $133 Wells Fargo $130 Walmart is the 14 th largest company in the world with a market cap of $383.98 billion.

You can trade Walmart Inc. (WMT) and many other stocks from the NYSE, NASDAQ, HKEX and the ASX with GO Markets as a Share CFD. Sources: Walmart Inc., TradingView, MetaTrader 5, Benzinga, CompaniesMarketCap

The USDJPY has been in an extremely strong upward trend since September 2021. This pair's recent price action has also been charactarised by relatively weak retracements as it has trended higher. Inflationary pressures have acted as a strong catalyst for the USD against most other currencies further aided by the Federal Reserve taking a strong stance against inflation with a series of aggressive interest rate hikes.

At the same time, the JPY has remained weak as the Central Bank of Japan has refused to intervene and shift from its dovish stance. The most recent retracement shows the potential for a good risk/reward Long trade. On the chart, it can be seen that the price has pulled back to the 23.60% Fibonacci level, which is at 132/133JPY.

This area also doubles as a support zone with the prior resistance level becoming a level of support which is another sign that the trend may continue. On the weekly chart, the characteristics of the candlesticks near the support zone also support the premise that the price may bounce. The candles have long wicks touching the support area indicating that the buyers are soaking up the supply.

They have also closed near their opening price again showing how buyers are soaking up the supply. The 4-hour chart shows a consolidation of the price forming a triangle, with the potential to break out to the upside. This may provide an alternative entry signal for the same overall strategy.

An important aspect to remember when trading this strategy is to ensure that price occurs with relatively high volume. Large volume indicates that buyers are regaining control over the price, and that sellers have become exhausted. Potential risks There are some risks with this trade.

Firstly, the pair is already quite overextended with the price at multi-decade highs. In addition, with US inflation fears potentially easing and interest rate hikes priced in already, the current price may be near its peak.

USDJPY ready to bounce or retrace further. The USDJPY has been recently provided great buying opportunities for traders. However, in recent days it has posted its largest drop since beginning the current upward at the beginning of January 2021.

The question remains, is this just a standard retracement or is it a symbol of a much bigger reversal. In the last few months, the USD has risen sharply as the market has responded to inflation fears and geopolitical events. With inflation levels at record levels across much of the developed world many Central Banks have shifted to a hawkish stance regarding their monetary policy with the USA being a prime example of this.

On the contrary, the Central Bank of Japan has remained dovish almost acting as a lone solider compared to other countries in this regard. Despite this, as bond yields have begun to settle down and the market has begun to price in recession fears and inflation, the YEN has become attractive again. Technical Analysis Looking at the technical elements of the chart, the price is down from the multi decade highs of 139 that it reached in the middle of July.

Importantly the price has also dropped below the most recent support level. In addition, the price has also breached the 50-day moving average. The question that remains is whether this is a simple retracement or the signs of a reversal occurring.

There are two characteristics of this price action that support the potential bounce back to the upside for this currency pair. Firstly, on the daily, chart, although the price did break through the initial first level of support it is currently holding the next stronger level down at 131/132. In addition, looking at the weekly chart, the price is showing a relatively strong bounce off the same 131/132 zone.

This multi timeframe analysis, further supports the continuation of the upward trend of the pair. The midterm buy target may be a retest of the 140 level. There is a large risk with this trade.

If the ‘Top’ is indeed ‘in’ and the pair does start to falter, then there is risk of massive selling. This is because the pair is already so overextended to the buy side. In addition, a rush to close Yen short positions may further accelerate the move back downward.

If this does occur and the 130 level breaks it may see the price fall to the 125 level. The short-term future of the pair will still likely be determined by short term economic news and activity within both Japan and the USA.

US economic data revealed last night shows that the country’s GDP has shrunk by 0.9%, although some are remaining positive that a recession may still be avoided. Despite the worrying figures, Federal Reserve Chair, Jerome Powell, outlined his belief that due to low unemployment figures of 3.6% and a strong market for jobs with 11 million job openings that there may be a 'soft landing'. Joe Biden commented, “It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation.” More US CPI data is expected to be announced tonight.

In response to the GDP figure, the US indices had another green day with the Dow Jones, the Nasdaq, and the S&P500 all rising 1.03%, 1.08%, and 1.21% respectively. In terms of share price movement, Meta’s stock price dipped 5.22% as it posted its first-ever quarterly drop in revenue, signaling how interest rate hikes have been impacting growth companies. The data also followed through to the Australian market with the yield on 3-year government bonds falling to 3.1%.

The ASX200 also continued its momentum for the week as it pushed higher again on Thursday. Brent Crude Oil had a mixed day ending the day flat at $107.58. Gold continued to bounce off its support zone and climbed up 1.25% and Natural Gas fell 4.66% as it continues to pull back from its recent highs dropping 4.66%.

FOREX and Cryptocurrency The USD dropped sharply as the GDP figures were announced. It recovered briefly, before selling back down, closing towards the lowest price of the day, a total drop of 0.28%. Bitcoin and Ethereum also gained momentum as money continued to flow back into risk assets, with the latter jumping to its highest level since the middle of July.

ETHUSD closed at $1726 and Bitcoin at $23,860.