US and European futures are trading lower today as the economic data out of the US continues to strengthen the argument that there are greater chances that the Fed may maintain its pace of hawkish interest rate hikes. The Services PMI data released yesterday confirmed that the Fed still has a free runway with respect to its monetary policy, meaning they do not have to slow down the pace of interest rate hikes as the Chairman suggested last week.
Overall, the US stock market has been posting losses for three consecutive days and there is a possibility that we may actually see some bargain hunters stepping into the market. Having said that, fundamentals are very much driving the price action in this market. The fact that China is dropping its zero covid measures in different parts of the country could be highly positive for the global economy as China is the second biggest economy in the world.
Following the greatest month for the euro since 2010, traders who depend on the customary year-end surge may be disappointed. According to historical data, the value of the single currency typically rises against the dollar in the month of December. However, with a rise of more than 5% in November, the standard for additional holiday happiness has been raised significantly. That’s before taking into account the fact that investors will face a variety of macroeconomic headwinds in the area this winter as they ready themselves for a possible energy shortage. When significant meetings of central banks are added to the mix, buyers of the euro face an overwhelming number of challenges.
Potential Tariffs On China
According to sources with knowledge of the situation, the United States and the European Union are considering imposing fresh tariffs on Chinese steel and aluminum as part of an effort to combat carbon emissions and global overcapacity. The United States of America and the European Union want to utilize tariffs, which are often used in trade disputes to advance their climate agenda. This would signal a fresh strategy if they were successful. An agreement with the EU, including specifics on how to identify thresholds for applying tariffs, isn’t likely until late next year at the earliest, according to the sources. The idea was generated within the Biden administration, is still in its early stages and hasn’t been formally proposed.
It is highly likely that the tariff plan framework, which is primarily directed at China, the world’s largest carbon emitter as well as a producer of steel and aluminum, will widen the divide between Beijing and Washington, which is particularly unfortunate given that the two nations have committed to working together to combat climate change. During prolonged trading, shares of companies producing aluminum and steel in the United States rose.
As the G7 countries introduce their price cap on Russian oil, India doesn’t seem to be paying much attention to these new measures. Russia has become its top partner for oil supply, and in the month of October, India imported a record amount of oil from Russia in its history. The country’s officials made it clear yesterday once again that it is in India’s interest to continue to buy cheap oil, and currently, Russia is providing them with the means to do that.
As for oil prices, Crude oil suffered serious losses yesterday on the heels of the Russian price cap move by the G7. However, the sell-off is a lot less intense today, but the price action is picking up the trend where it left off yesterday. The crude oil price has dropped below the critical support of 80 and is currently at 77. This means that the price is likely to re-test its next support of 75.