Gonet: Market news of June 13th

Dow -2.73%, S&P 500 -2.91%, Nasdaq -3.52%, Russell 2000 -2.73%, SOX -3.60%, Eurostoxx -3.36%, SMI -2.10% .

Risk aversion is back in force on Friday after the release of the US CPI, which shows inflation is still rising, meaning it has not yet peaked. Most of the positive surprise comes from food and energy. The core CPI (Consumer Price Index) continued to slow year-on-year – falling to 6% from 6.2% – but not as fast as expected. May’s 8.6% increase from May 2021 hits a new 40-year high. Many economists had hoped Thought that the month of March would mark the famous peak, unfortunately this is not the case. Analyzing the statistics more closely, we find that inflation spreads to almost all categories. 70.6% of the CPI basket is up in price by more than 4% on a yearly basis, a new high. While the major contributors are housing, food, airline tickets, and new and used cars, medical supplies, furniture, leisure, and clothing are also making headway. We also see demand shifting from goods to services.

Friday’s inflation report shows the Fed still has work to do to rein in rising prices. Market sentiment took a hit earlier in the week, with the European Central Bank (ECB) proving more hawkish than expected, while the World Bank and the OECD revised down their outlook for headline growth. Let’s also not forget the Covid management in China, which is increasingly worrying the markets and we are getting more than fertile ground for the sharp drop in the indices on Friday evening.

The US 2-year bond yield goes into orbit and breaks through the 3% to climb to 3.16% this morning, not seen since 2008. The 30-year falls below the 5-year, (3.22% vs. 3.33%) and the 10-year retested 3.20% very early this morning, only to return to 3.19% now. Market is now contemplating a rise of 75 points on Wednesday night, it is starting to get busy, the norm is 25 basis points. Everyone now understands that the Fed needs to step up its fight against inflation, so everyone fears a hard landing in economic growth. The Fed is even more in question, the pressure on Jerome Powell’s shoulders is still mounting, and the market is now awaiting a higher inflation spike, it’s kind of a worst-case scenario that the bulls fear.

The S&P500 (SPX) Index made its 9th weekly decline in 10 weeks, falling 5% over 5 days and landing right at the 3,900 point level at Friday night’s bell. The next support levels are 3,815 (38.2% Fibonacci retracement of the “post-Covid” surge from 2,191 to 4,818), then 3,810, the low of the May 20th session. For its part, the Nasdaq100 (NDX) is very close to its support at 11,768 (50% Fibonacci retracement), closing at 11,832 on Friday. Then it will be 11,492, the low of the May 20th session. Volatility is advancing but not as much as one might have thought, the VIX is up 6.4% to 27.75, remember it has room through 37-39. All SPX sectors fell on Friday, with the day’s worst performers coming from Financials, Technology and Consumer Goods.

The dollar continues to rally, the Dollar Index (DXY) climbs to 104.55, while the eur/usd pair is trading at 1.0481 this morning, the market pricing in the spread between the United States and the Eurozone, is fleeing in the greenback and also takes refuge Consider the real risk that Emmanuel Macron will not get an absolute majority in the assembly in a week. The recent low for the eur/usd pair is 1.0354, hit on May 12th. Gold edged higher despite the greenback’s strength, trading at $1,863 an ounce this morning. Oil remains in demand, the barrel of WTI Light Crude moves to $118.23 despite a renewed rise in inventories seen last week.

The week ahead is a busy one and investors will have little rest as action is driven by the Fed’s fight against inflation and supply chain issues that are pervasive in almost every sector. On the macro menu, ahead of Wednesday night’s FOMC rate announcement at 8pm, investors are looking forward to the report on US producer prices, retail sales and manufacturing, and Jerome Powell’s press conference to follow. This week we also have the decisions of the Bank of England and the Swiss National Bank (Thursday) and the Bank of Japan (Friday).

Emmanuel Macron could lose his absolute majority in the French parliament, forcing him to make compromises to push reforms. His party and its allies are expected to win between 262 and 301 seats after yesterday’s first round of voting. A total of 289 deputies are required for a majority. The second largest group appears to be Nupes, an alliance of left-wing parties led by Jean-Luc Mélenchon. The second round will take place on June 19th.

Today is a macro breather day for investors, which doesn’t hurt in this rather gloomy environment.

TotalEnergies: Berenberg remains on the buy side with a price target raised from EUR 58 to EUR 66. Qatar has awarded TotalEnergies a 25% stake in a new national company to increase the country’s overall capacity to export liquefied natural gas. US beauty brand Revlon’s action collapsed 53% on Friday amid bankruptcy fears. According to the Financial Times, the British financial police officer monitors Credit Suisse. The US SEC is investigating Goldman Sachs over ESG funds. BlackRock offers nearly half of its clients who own index products the ability to vote at general meetings. Tesla will split its stock into three parts to make it more accessible and improve the stock’s liquidity. Netflix is ​​starting a second season of Squid Game. Google is paying $118 million to settle a class action lawsuit alleging gender discrimination. Novartis presents positive data on Kymriah in leukemia.

Last night and this morning, indices in Asia fell sharply in sympathy with Wall Street. Tokyo fell 3.01% at the bell, Hong Kong 3.44%, Shanghai 1.25% and Seoul 3.52%. SPX futures fell 1.8% and Europe opened 1.9%. Bonds are falling too, cryptocurrencies are being dumped, we are dumping a bit of everything this Monday morning, two days before the all-important Fed meeting. As we know, financial excesses are often corrected by…excesses. The current period is very complicated, no one disputes it, however, it will allow calm minds to seize opportunities, quality companies also remain in the eye of the quality storm. Of course, nowadays we hardly ever talk about TINA or FOMO, but rather about VUCA (Volatility, Uncertainty, Complexity, Ambiguity). Need to remember that patience is the mother of virtues in finance? Probably yes…

#Gonet #Market #news #June #13th

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