Market Summary:
- Flash PMIs were the latest economic reports to point to an economic slowdown for Europe on Friday
- Lower demand and new orders weighed on France (the second largest economy in Europe) with the manufacturing, services and composite PMIs contracting faster than expected
- Germany’s composite PMI contracted for a fourth month although not as fast as expected, manufacturing contracted for a 13th month although services contracted at a slower pace of 49.8 (above 50 is expansion)
- The UK composite PMI contracted at its fastest pace since February 2021, adding to the case for the BOE to have reached their peak intertest rate this cycle, and sending GBP/USD to a fresh 6-month low
- The US flash composite PMI barely expanded at 50.1, the services PMI softened to 50.5 and manufacturing contracted for a fourth month at 47.9 (although has contracted for 9 of the past 10)
- Australian PMIs were mixed, with manufacturing contracting at its fastest pace in three months (and falling for a sixth) although services PMI expanded for the first month in three
- The Bank of Japan (BOJ) kept monetary policy unchanged during another uneventful meeting, even though core CPI remained above the BOJ’s 2% target for a 13th month at 3.1% y/y
- Global stock market indices were under pressure last week, with Wall Street leading the way lower. The S&P 500 fell nearly 3% during its worst week in six month and fell to a 14-week low, and its weekly range was 189% of its 10-week average true range (ATR)
- WTI crude oil snapped a 3-week winning streak with a bearish spinning top week
- The US dollar index rose for a 10th consecutive week, which is only its second such bullish sequence in history (and last seen in 2014). Given it has failed to break above its YTD high, it remains a candidate for some mean reversion which could help AUD/USD remain above the 64c
Events in focus (AEDT):
- 18:00 – German Ifo business sentiment
- 23:00 – ECB President Lagarde speaks
- 11:30 – Australian business sentiment (NAB)
ASX 200 at a glance:
- The ASX 200 fell as much as -1.6% on Friday, although market sentiment reversed just after the open to recoup all losses and close the day with an elongated bullish pinbar
- Prices also rebounded back above the 7,000 handle to show demand around that key level, although it may simply be a case of bears booking profits ahead of the weekend as opposed to it being a bullish signal
- With sentiment damaged, we’d prefer to see pullbacks towards the 7,000 handle before reconsidering longs and to focus on intraday opportunities
- 7092, 7100, 7133 and 7200 make likely resistance levels (and area of potential interest for bears to consider fading into)
S&P 500 technical analysis (daily chart):
It certainly wasn’t the best week for bullish stock market investors last week, with global indices falling in tandem. However, the daily range for the S&P 500 on Friday was the lowest in three days, and the market held above the 4300 handle and 38.2% Fibonacci retracement level. It appears that it wants to at least test the bullish trendline projected from the September low, but that doesn’t mean it will get there in a straight line. The RSI (2) also touched oversold to warn of a potential inflection point over the near-term, and we wouldn’t be too surprised to see prices retrace higher at the start of the week before bearish momentum returns. It is then a case of seeking evidence of a swing high on the daily timeframe lower for bearish setups, in hope of an improved risk to reward ratio.
