Stock Market Today
US futures and European futures are trading higher despite a weak reading of German GfK Consumer Climate data. The data came in at -15.5 while the forecast was for -14.6. This economic data set is an essential reading to gauge economic sentiment in the biggest economy of the Eurozone. There is no doubt that Russia had significant business relations with Germany, a country considered the economic engine of the Eurozone. Given that economic ties are on the verge of collapse between Russia and Germany, German businesses are worried that the country may get caught on the wrong end due to the US and Russia’s conflict. The sanctions imposed by Germany on Russia due to the US pressure could cost them dearly, and the current economic situation has yet to factor that in full.
In terms of economic data, we have the US Consumer Confidence and JOLTS Job opening data which is hitting the tape later in the day. The JOLTS Job opening number will be released at 15:00, and the forecast is for 11.00M, while the Consumer Confidence, which is also coming out at the same time, is expected to come in at 106.9.
We also have the FOMC member, John C. Williams speaking today. The FOMC would have hiked interest rates by 50bps in March, but the invasion of Ukraine by Russia stopped them. The war has exacerbated the ongoing inflation situation, which worries many Fed members, including Williams. Jerome Powell, the Fed Chair, has already said that the Fed isn’t comfortable classifying inflation as transitory anymore. Any hawkish commentary from Williams is likely to push the dollar index higher, but traders are likely to remain sceptical about 50 basis points interest rate hike during their next meeting.
Oil prices are caught in a downward spiral, and yesterday we saw the most significant one-day sell-off since March 15. The sell-off in oil prices is mainly due to the concerns among traders about the new lockdown in China, which has sent oil prices tumbling. Interestingly, this has occurred ahead of the OPEC meeting, taking place on Thursday this week. So far, traders have been worried about the supply shortage due to the increase in oil demand and geopolitical tensions in Ukraine. However, China is one of the biggest consumers of oil, and the cities that have gone under a full lockdown are the backbone of China. Shutting down these cities means a severe reduction in oil.
The current sell-off in oil prices represents an opportunity for many for several reasons. Firstly, the ongoing war situation in Ukraine isn’t going to cool off overnight, and it seems unlikely that the US and its allies can make a U-turn on their sanctions (imposed on Russia) that easily. In addition to this, there is no short-term fix for the oil supply shortage. However, traders are indeed hoping that they will see a more favourable outcome in terms of the Iranian nuclear deal. However, that isn’t that likely, and this is because Tehran has requested the US to remove the Islamic Revolutionary Guard Corps from its list of terrorist groups. The United States indicated the renewal of a nuclear agreement with Iran might not happen soon.
As for the upcoming meeting, traders are optimistic about the possible collaboration among OPEC members. Most traders had concerns that the UAE, Saudi Arabia, and other cartel members may cave to the US pressure to break their ties with Russia. However, the UAE endorsed its relationship with Russia as the Energy Minister confirmed that their alliance with Russia will stay.
The most important event for gold traders this week is the US NFP data, which certainly tends to reverse the current decline in precious metal. Gold prices are losing their mojo as investors believe that most of the risk in relation to the Ukraine and Russian war is fully priced. The US appears to be done with sanctions on Russia, but the impact of those sanctions on the US and global economies is undetermined. After all, sanctions on Russia aren’t only going to hurt the Russian economy, but there will also be a spillover effect, which is what keeps the precious metal’s price above water.