Mixed markets as we head into the business end of the week
Markets in Europe are once again mixed, with US indices eyeing a similar open as we head into the business end of the week.
Earnings season remains a key focal point for investors and Monday got us off to a slow – albeit disappointing in the case of Alphabet – start but this should pick up in the coming days. The Fed begins its two day meeting today with the policy decision and press conference following on Wednesday, while the jobs report is also due on Friday to bring a heavy week to a close. We’re probably seeing some caution right now in anticipation of these, particularly as we’re now back at record highs in the case of the S&P 500 and Nasdaq.
The Chinese PMIs overnight won’t have spread much optimism, only a month after that very data led many to question whether they had become too pessimistic about the world’s second largest economy. It’s important to note that the manufacturing PMI remained in growth territory – just – but this was undoubtedly a setback. This is probably a sign of what we can expect in the near-term, mixed data that’s volatile from month to month.
Data from the eurozone has provided some positivity – against the backdrop of a broadly negative environment, it’s worth pointing out – with first quarter growth and unemployment figures both exceeding expectations. I don’t think anyone is kidding themselves after this data – 7.7% unemployment is still not good enough and 1.2% annual growth certainly isn’t but at a time when the data seems to be deteriorating month on month, we have to take what we can get.
Oil higher again but rally in doubt
We’re seeing a second day of gains in the oil market but I’m not getting too excited just yet. The market was feeling toppy prior to Friday’s sell-off, which was further highlighted by WTI making significant declines on a story that was nothing more than a slightly altered rehash of something we’ve heard numerous times before, without substance.
We may be seeing some gains now but this currently looks like little more than a slight correction of Friday’s declines after price bounced off a key support zone. I wouldn’t be surprised to see this area come under pressure once again with today’s API inventory report – and the EIA report tomorrow – potentially providing the catalyst.
Gold in limbo as major US events line up
Gold is on the up again on Tuesday, with a softer dollar aiding the rise as the yellow metal bounces back from its declines at the start of the week. To rebound this quickly may be seen as an encouraging sign but I remain unconvinced by rise we’ve seen over the last week. The picture is clearly clouded for gold, with a break below $1,280 clearly being a negative development as this proved to be a strong support zone since the start of the year.
We’ve broken back above here and now found support at $1,280 which may indicate a false breakout but upside momentum is also looking limited which casts doubt over this. Everything should become clearer over the coming days with numerous major US events potentially playing havoc with the greenback – Fed decision, jobs report, earnings – but for now we remain in limbo. We may make new highs but as long as we remain below $1,300, gold continues to look bearish.
