Ugly economic data was responsible for a decent plunge in US equities on Tuesday.
The S&P500 slid 2% yesterday and Nasdaq took another 3% hit following a soft CB consumer confidence index and sharp fall in Richmond manufacturing index, hinting at softer economic activity as a result of tighter Federal Reserve (Fed) policy.
European futures hint at a bearish start today, though the firm oil and commodity prices should help FTSE tempering losses.
Oil up
The latest API data showed an almost 4-million-barrel decline in US oil inventories, versus 110’000-barrel fall predicted by analysts. The barrel of American crude extended to $113.50, and Brent jumped above $118 per barrel.
Sentiment remains comfortably bullish with the rising tensions between G7 and Russia. We still don’t have details regarding the price cap on Russian oil, yet a wrong move from G7 could upset Russians and lead them to cut the oil supply to Europe and worsen the energy crisis.
As a result, risks remain tilted to the upside, and traders see the price pullbacks as opportunities to strengthen long positions. There is a solid support between the 100-DMA, near $107pb, and the $100 psychological mark.
And, there is little chance OPEC does anything to give relief to the market.
Euro bulls lose steam
We have a plenty of central bankers speak today at a European Central Bank (ECB) event, including the Fed Chair Jerome Powell and the Bank of England (BoE) Governor Andrew Bailey. But all eyes are on Christine Lagarde.
Investors are craving for more details about the ECB’s mysterious antifragmentation tool, which should give the ECB a green light to get more hawkish on its rate policy, but the euro bulls are increasingly unconvinced that the new tool would magically solve the fragmentation problems.
The EURUSD should remain capped below its 50-DMA, unless the US dollar retreats suddenly. But softer dollar is not on the cards, as even bad economic data doesn’t help the Fed doves show up their beaks.
