US and European futures are trading softer today after their outstanding rally yesterday. The S&P 500 recorded its best and biggest two-day rally since March 2020 yesterday. The reason that we see a lot of optimism among investors and traders is that they believe the Fed will not be able to push the curve too much further in terms of increasing the interest rate. Yesterday, we saw serious weakness creeping in the US labour market as per the US JOLTS data.
Nonetheless, the reality is that the global stock market, especially the US stock market, has certainly started the month on solid footing after recording one of the worst quarters since the financial crisis. A lot of the strength in the stock market may also be attributed to bargain hunters coming back to the market. However, it is important to note that we are not out of the woods yet, and there is a long path out to go. The reality is that markets are likely to stay volatile in the near term and all of this will be primarily driven by expectations around inflation and policy rates.
In terms of economic data, today is an important day as today we will learn of the US ADP number, which is expected to come in at a 13:15 BST. The forecast is that we may see an improvement in the labour market as the number is expected to print a reading of 200K against the previous reading of 122K. If the number demonstrates robustness, we could see the Fed taking a stronger stance toward the dollar index.
Twitter stock could be the stock of the day as Elon Musk has finally decided to throw in the towel and give Twitter what it deserves, and that is the original offer. The company’s stock was halted a number of times yesterday when the news came out, and towards the end of the day, the stock lifted more than 22% yesterday.
It is clear now that Musk’s tactics to lower the price of his deal didn’t work when he argued Twitter did not have the number of clients that it thought it had. A large number of claims could deemed simply flimsy. Musk said that he was backing out of the agreement because Twitter had exaggerated the amount of “bots” using the site. He and his legal representatives alleged that the social media firm was deceiving investors by submitting incorrect statistics in corporate filings with the Securities and Exchange Commission.
When the company’s shares declined in tandem with a wider downturn in the general market, Twitter suggested that Musk was seeking a pretext to pull out of the agreement. But these are the kind of tactics that most of companies use when they try to acquire a new company.
Now, Elon has the biggest test of his life, and that is turning the fate of the company. If there is anyone who can change the way the company works more efficiently, it surely might be Musk. If Musk succeeds in turning the company, he could become the entrepreneur of the century.
Gold prices have eased off from their high as the dollar index is moving higher ahead of the important economic reading, the ADP data. As mentioned earlier, any sign that shows that the labour market is still resilient will make the Fed more confident about hiking the interest rates, and that will make the dollar index even stronger. A strong dollar will pull gold prices lower. In addition to this, we also have the US Services PMI numbers at 15:00 BST and that number will also be closely watched by gold traders.
OPEC’s meeting is the key fundamental that traders are looking at today. The price of Crude and Brent Oil has seen improvement in the past few days, and that is purely because traders believe that OPEC will cut its production more aggressively to respond to the slow global oil demand. If OPEC delivers on its promise, we may see little more movement to the upside, but it is important to say that a lot of that is already priced in.