STATE OF THE MARKETS
Stocks struggled amid inflation concerns. US stocks tried to rally but failed after Secretary-Treasurer Yellen commented that inflation might be sticky even after rate hikes. Small cap Russell (-1.49%) fell the most, followed by S&P (-1.08%), Dow (-0.81%) and Nasdaq (-0.73%) as Dollar regained the 102.50 minor handle. Yields continue to rise but inversions remain between the 5Y (3.04%), 7Y (3.07%) and 10Y (3.03%) maturities.
In the commodities market, crude continues its upward trajectory after supply concerns plague markets with the Iran nuclear deal out of the window. The black gold settled above $120.60/bl after New York closed. Gold was trading in a tight range of $1,859.50 and $1,844.50/oz as markets await the inflation figures this Friday. Elsewhere, iron ore edged lower to $145.30/tn on profit taking.
In the FX space, Loonie and Aussie continue to reign in demand in the medium and long term accounts as Euro advanced further in the demand territories ahead of the ECM meeting on Thursday. Long term investors seemed bullish as more Dollar in demand than Swiss and Yen.
On Thursday, markets are expected to remain cautious while waiting for earning reports from NIO Inc (NIO), DocuSign (DOCU), Bilibili (BILI), Vail Resorts (MTN), FuelCell (FCEL), and Cango as well as the latest figures in US jobless claims.
OUR PICK – AUD/USD
Hikes beyond September may support the Dollar. Recent Feds talk that rates may have to raise further beyond September has supported the Dollar. Secretary-Treasurer Yellen remarks on sticky inflation may signal support for the idea. Concerns on stagflation may dim sentiments and put Aussie under pressure as RBA rate hikes failed to lift Aussie further. We see risk to the downside in the medium term.
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