Tech stocks have stabilized somewhat and European stocks are a little higher this morning, but global equity markets remain in defensive mode. The Dow Jones fell more than 1.3% and the S&P 500 was nearly 0.9% lower on the day, even as the Nasdaq composite closed well the lows to end the day flat. NDX was slightly weaker with the 50-day SMA holding resistance around 13,375, but the index recovered from the 13,094 low to end at 13,351. Apple, Alphabet, Tesla and Microsoft all dipped, weighing in on the larger market, but companies like Exxon, Home Depot and JPMorgan also dragged the larger market down in a day characterized by large-scale sales. European markets were down sharply on Tuesday, after following Monday’s beating on Wall Street. The FTSE 100 ended the session at -2.5% and below 6,950.
Shares are more stable this morning, with the FTSE rising 0.7% at the start of trade to 7,000 and the Dax rising 0.3%, but investors will fear that yesterday’s volatile session is a taste of the things to come. For example, the structure of the terms of Vix futures is in a fairly steep backdrop until October, suggesting that investors fear the markets will boil over the next few months after the strong ramp-up of the first 4 months. of the year. US futures indicate a lower open later.
At the start of trading today, the FTSE 100 drove gains in Europe, miners higher on rising prices in China, while Diageo rallied by announcing earnings growth would be 14% this year and relaunched a £ 4.5bn share buyback program. The FTSE 250 rose 0.4 percent in early trading, with figures showing the UK economy grew 2.1 percent in March, meaning it only contracted 1, 5 percent in the first trimester. The UK economy is much more resistant to lockdowns than it was at the start of the pandemic, but I hope this flexibility will not be tested again. There is no doubt that the real blow to the economy will not be known until government interventions and the vacation program are over.
Asian markets were volatile with Tokyo down 1.6 percent and ASX in Australia offering another 0.7 percent. Taiwan stocks were hammered, down 8.6% at one point before ending down more than 4%. Mainland Chinese stocks were higher and the Hang Seng rose. Iron ore futures hit a new high even after Chinese officials decided to cool the market earlier this week as coal futures were on the rise. Hong Kong-listed shares of Xiaomi rose 6% on reports it could be removed from the U.S. blacklist. Any thaw in US-China relations could be positive for proxies like AUD.
Oil rose as data showed lower inventories, as market participants continued to bet on a strong demand-driven recovery as OPEC stuck to its 2021 forecast. API showed a drop in US inventories of 2.5 million barrels. OPEC maintained its view that demand will increase by 5.95 million bpd this year, but lowered the immediate second quarter outlook by 300,000 bpd due to the rise in coronavirus cases in India. The Colonial pipeline shutdown is continuing but is expected to be restarted almost completely by the end of the week. There have been reports of panic buying gasoline on American courts. Beats loo roll I guess.
Inflation is the watchword, so today’s US CPI numbers will be closely watched. The data, due at 1:30 p.m. BST, is expected to show consumer prices to rise 3.6% year-over-year in April and + 0.2% from March 2021. Base prices are expected to rise. increase 0.3% month-on-month. We were still going to have hot numbers this summer (base effects, supply chain issues, higher commodity prices), and the market was always going to panic a bit. The question really is for later – when does the transient turn into something more lasting? Wages are the key. Federal Reserve officials still view the surge in inflation as temporary. Fed Governor Lael Brainard was the latest to send this message home, saying yesterday that Friday’s jobs report highlighted “the value of patience … remaining patient during the transitional surge.” [in inflation] associated with the reopening will help secure the underlying economic momentum that will be necessary to achieve our goals. “
Jolts’ job posting figures show that the US economy is hungry for workers. A record 8.1 million messages were recorded in March, well above the estimated 7.5 million. Hiring is not keeping pace – US employers added 770,000 jobs in the month and just 266,000 in April. He points to a tension in the labor market that unemployment levels don’t really reflect. As noted earlier, this highlights concerns about the rise in wage inflation as companies struggle to hire workers. The liquidation of federally-funded unemployment benefits should help – seven US states are ending support this summer, saying stimulus funds are preventing people from finding work.
Neil Wilson is Chief Markets Analyst at Markets.com