Stock Market Today
US and European futures are trading with caution as traders are concerned about the incident that happened in Poland yesterday. Poland, which is a member of NATO, is using article 5, which calls for mutual defense when another country attacks a NATO member. However, Russia has denied the allegation that it targeted Poland after one of the missiles hit Poland’s territory yesterday.
From a trading perspective, many investors are on the same page that the missile must have only landed only due to some mistake in Poland. If this was a deliberate reaction and an actual attack on a NATO member, the color that we would have seen in the markets today would have been only pure red and traders running for the hills. Hence, it is difficult to anticipate that Poland’s incident was actually an attack by Russia; Moscow is more geared towards easing tensions between Russia and the West rather than anchoring them up.
Having said this, the response from NATO members on the back of this incident is something that traders must keep a close eye on, as any aggressive behavior from Poland or NAO members could easily escalate the situation to a point where things may begin to get out of hand.
Over in Asia, the price action has been muted, and caution has been practiced. The Nikkei 225 index in Japan was able to recoup some of its earlier losses and finish the day up 0.15% thanks to a roughly 4% increase in the value of heavyweight SoftBank Group. The Topix recovered some of its earlier losses to trade mostly unchanged. After a one percent drop, the Kospi in South Korea was trading about even, while the S&P/ASX 200 in Australia was down slightly.
Both the Hang Seng index and the Hang Seng Tech index had losses of more than one percent in Hong Kong. Both the Shanghai Composite and the Shenzhen Component saw losses of 0.22% and 0.545%, respectively. The most comprehensive index of Asia-Pacific equities tracked by MSCI had a decline of 0.87%.
As for the economic data, there is no doubt that traders have been a lot more optimistic after the dramatic decrease in the inflation readings in the US. Now, some are even hoping that perhaps this could be a new trend for other nations. However, this could be a surprise for those who think that inflation in the UK may have changed its direction or broken its momentous pace. The cost of living crisis is crushing British people, and sadly the reality is that today’s upcoming inflation number is only going to make things harder than softer. This is because today’s inflation data is expected to print a reading of 10.7% from its previous number of 10.1%.
A strong inflation reading is going to add more pressure on the BOE, who has already pushed the interest rate way too much in the UK, and last time it increased the rates by another 75 basis points. A strong reading is only going to increase the odds that the bank will have to do to bring inflation, and another increase in the interest of the same magnitude as the time would make the economic activity to slow down further and deepen the economic recession in the UK.
Gold prices are still on fire, and they are still moving higher and likely to challenge the resistance of 1,800. The main reason behind this continues to be the weakness in the dollar index and also ongoing geopolitical tensions. The Polish event has made traders somewhat cautious and seen more buying of gold. The upcoming US retail sales number are going to be an important one as a drop in the retail sales number will show that traders are cautious and they are willing to dig deep into their pockets, which means a slowdown in economic activity. Such as scenario could bring more buying for the gold prices.
Oil prices continue to trade lower as traders wonder how much the impact will be on the demand side of the equation as OPEC has lowered its forecast for oil demand. But the important factor that needs attention here is that the cartel is not going to sit on its hands and just reduce its demand forecast and not going to do anything with its supply. Currently, it is trying to justify its supply cuts by lowering demand but at the same time, this keeps the door open for further supply-cut measures by the cartel.