Stay Ahead of the Game: Your Daily Market Update for May 21, 2024

Daily Market Outlook, May 21, 2024

Munnelly’s Macro Minute…“Asian Markets Snap A Seven Day Winning Streak”

Asian stocks paused on Tuesday after a seven-day winning streak. Profit-taking by investors led to a decline in Chinese stocks. Hong Kong’s equity market also experienced a downturn, with Li Auto leading the losses in the MSCI Asia Pacific index due to lower-than-expected first-quarter vehicle sales. Japanese stocks remained steady thanks to positive insurance company earnings. The economic challenges in China remain a major concern in Asia, with recent data showing no signs of recovery in the country’s debt-ridden real estate market. Land sales last month generated the lowest revenue for local governments in eight years, highlighting the financial struggles faced by agencies heavily reliant on this type of income.

This week’s main data releases are set for later in the week, leaving today’s schedule relatively light. In the UK, the May CBI industrial trend survey will offer an update on the factory sector. The April survey revealed that orders remained very weak, while selling price inflation reached its highest level since February 2023. It will be interesting to see if the May data indicates any improvement. The most anticipated data release of the week is the UK April CPI inflation report, due early tomorrow. According to consensus forecasts, the year-on-year headline rate is expected to drop sharply to 2.1% from 3.2% in March, marking the lowest rate since July 2021. This decrease is primarily due to an approximately 12% reduction in the Ofgem energy price cap. UK core CPI inflation, which excludes food and energy, is also expected to fall to 3.6% from 4.2%. However, this rate remains higher than the headline rate, with services inflation predicted to stay above 5%. While the anticipated drop in inflation is positive news, it remains uncertain whether Bank of England policymakers will see it as enough progress to justify an interest rate cut.

The Eurozone is anticipated to report a larger trade surplus in April compared to March, continuing the recent trend of increasing surpluses. This is mainly due to a decrease in import costs following a drop in gas prices earlier in the year. However, the recent rise in gas prices in May could potentially disrupt this trend.

Today, several central bank policymakers, including European Central Bank President Lagarde and Bank of England Governor Bailey, are scheduled to speak. They are expected to speak at events where they are unlikely to address near-term monetary policy. Stateside, there will be more Fedspeak as Governor Christopher Waller and four regional Fed bosses are scheduled to speak at different events. The minutes of the Fed’s previous policy meeting, which are due on Wednesday, will be important, but they do not reflect the recent decrease in CPI after three consecutive months of higher-than-expected results.

Overnight Newswire Updates of Note:

• RBA Resumes Rate-Hike Discussion On Renewed Inflation Concerns
• NZ Tsy: There Is No Near-Term Turning Point Seen For The Economy
• Fed’s Mester: Fcst Of 3 Cuts This Year Is Now Probably Too Many
• Fed’s Daly Says There’s No “Urgency” To Adjust Interest Rates
• Oil’s Market Metrics Point To Weak Outlook Ahead Of OPEC+ Meet
• Russia Suspends Ban On Gasoline Exports Until June 30, Gov Says
• Dell Deepens AI Push With New PCs, Nvidia-Powered Servers
• GSK Faces Whistleblower Suit From Lab That Found Zantac Risk
• Rio Tinto Invokes Force Majeure On Australian Alumina Sales
• Samsung Elec. Picks Vet Exec To Tackle ‘Chip Crisis’ Amid AI Boom

FX Options Expiries For 10am New York Cut

EUR/USD: 1.0800 (631M), 1.0840-50 (2.1BLN), 1.0860 (320M), 1.0900 (942M)

USD/CHF: 0.9055 (1.9BLN), 0.9100 (383M). EUR/CHF: 0.9850 (898M)

GBP/USD: 1.2600 (210M), 1.2625-30 (718M)

EUR/GBP: 0.8600 (433M), 0.8650 (200M)

AUD/USD: 0.6565-75 (1.6BLN), 0.6650 (226M), 0.6675 (200M), 0.6705-15 (511M)

AUD/NZD: 1.0850 (304M). EUR/AUD: 1.6300 (200M)

USD/CAD: 1.3600 (460M), 1.3640-45 (1.4BLN), 1.3700 (1.3BLN)

USD/JPY: 154.50 (795M), 156.75 (295M), 157.00 (400M), 157.75 (590M)

AUD/JPY: 102.75 (330M)

It is anticipated that the RBNZ will maintain rates at 5.5% on Wednesday, but there is still a possibility of NZD volatility. The market is pricing in a 44bps cut in 2024, whereas the previous RBNZ forecast indicated the first cut in Q1 2025. Overnight NZD/USD FX options now expire after the RBNZ meeting, so there may be a reaction in the FX market. Implied volatility reflects higher expectations for realized volatility, with overnight rates at 10 to 15.0 and premium/break-even at 25 to 38 USD pips in either direction. Additionally, other short-dated NZD options are influenced by related event risk premiums.

CFTC Data As Of 17/05/24

• Japanese yen net short position is -126,182
• British pound net short position is -20,075
• Euro net long position is 17,155 contracts
• Swiss franc posts net short position of -41,107
• Bitcoin net short position is -177 contracts
• Equity fund managers raise S&P 500 CME net long position by 60,168 contracts to 920,863
• Equity fund speculators increase S&P 500 CME net short position by 40,882 contracts to 279,337
• Gold NC Net Positions: $204.5K vs $199.6K

Technical & Trade Views

SP500 Bullish Above Bearish Below 5280
Daily VWAP bullish
Weekly VWAP bullish
Below 5258 opens 5200
Primary support 5160
Primary objective is 5379

EURUSD Bullish Above Bearish Below 1.08
Daily VWAP bullish
Weekly VWAP bullish
Above 1.10 opens 1.11
Primary resistance 1.0981
Primary objective is 1.0550

GBPUSD Bullish Above Bearish Below 1.2630
Daily VWAP bullish
Weekly VWAP bullish
Below 1.2600 opens 1.2540
Primary support is 1.2443
Primary objective 1.2776

USDJPY Bullish Above Bearish Below 152
Daily VWAP bullish
Weekly VWAP bullish
Below 154.40 opens 152
Primary support 152
Primary objective is 165

XAUUSD Bullish Above Bearish Below 2376
Daily VWAP bullish
Weekly VWAP bullish
Below 2330 opens 2240
Primary support 2260
Primary objective is 2560

BTCUSD Bullish Above Bearish below 65500
Daily VWAP bullish
Weekly VWAP bullish
Above 70500 opens 78500
Primary support is 65000
Primary objective is 78500

How Will This Affect Me?

As an individual investor or someone interested in the financial markets, staying updated on daily market trends can help you make informed decisions regarding your investments. Understanding the current market conditions, including factors influencing different asset classes and regions, can guide your investment strategy and help you navigate potential risks and opportunities in the market.

How Will This Affect the World?

The trends and developments in global financial markets can have far-reaching impacts on the world economy. Fluctuations in stock markets, changes in central bank policies, and trade surpluses or deficits can influence economic growth, employment rates, and overall stability in different regions. By keeping track of these market updates, policymakers, economists, and industry experts can make informed decisions to address challenges and capitalize on growth opportunities in the global economy.

Conclusion

Staying ahead of the game in the financial markets requires a keen awareness of daily market updates and trends. By understanding how different factors impact various asset classes and regions, investors can make informed decisions to maximize their returns and manage risks effectively. Whether you’re an individual investor or a global policymaker, staying informed on the latest market developments is essential for navigating the complex world of finance.