Munnelly’s Macro Minute

Daily Market Outlook, May 21, 2024

Asian Markets Snap A Seven Day Winning Streak

Asian stocks paused on Tuesday after a seven-day winning streak. Profit-taking by investors led to a decline in Chinese stocks. Hong Kong’s equity market also experienced a downturn, with Li Auto leading the losses in the MSCI Asia Pacific index due to lower-than-expected first-quarter vehicle sales. Japanese stocks remained steady thanks to positive insurance company earnings. The economic challenges in China remain a major concern in Asia, with recent data showing no signs of recovery in the country’s debt-ridden real estate market. Land sales last month generated the lowest revenue for local governments in eight years, highlighting the financial struggles faced by agencies heavily reliant on this type of income.

This week’s main data releases are set for later in the week, leaving today’s schedule relatively light. In the UK, the May CBI industrial trend survey will offer an update on the factory sector. The April survey revealed that orders remained very weak, while selling price inflation reached its highest level since February 2023. It will be interesting to see if the May data indicates any improvement. The most anticipated data release of the week is the UK April CPI inflation report, due early tomorrow. According to consensus forecasts, the year-on-year headline rate is expected to drop sharply to 2.1% from 3.2% in March, marking the lowest rate since July 2021. This decrease is primarily due to an approximately 12% reduction in the Ofgem energy price cap. UK core CPI inflation, which excludes food and energy, is also expected to fall to 3.6% from 4.2%. However, this rate remains higher than the headline rate, with services inflation predicted to stay above 5%. While the anticipated drop in inflation is positive news, it remains uncertain whether Bank of England policymakers will see it as enough progress to justify an interest rate cut.

The Eurozone is anticipated to report a larger trade surplus in April compared to March, continuing the recent trend of increasing surpluses. This is mainly due to a decrease in import costs following a drop in gas prices earlier in the year. However, the recent rise in gas prices in May could potentially disrupt this trend.

Today, several central bank policymakers, including European Central Bank President Lagarde and Bank of England Governor Bailey, are scheduled to speak. They are expected to speak at events where they are unlikely to address near-term monetary policy. Stateside, there will be more Fedspeak as Governor Christopher Waller and four regional Fed bosses are scheduled to speak at different events. The minutes of the Fed’s previous policy meeting, which are due on Wednesday, will be important, but they do not reflect the recent decrease in CPI after three consecutive months of higher-than-expected results.

Overnight Newswire Updates of Note

RBA Resumes Rate-Hike Discussion On Renewed Inflation Concerns
NZ Tsy: There Is No Near-Term Turning Point Seen For The Economy
Fed’s Mester: Fcst Of 3 Cuts This Year Is Now Probably Too Many
Fed’s Daly Says There’s No “Urgency” To Adjust Interest Rates
Oil’s Market Metrics Point To Weak Outlook Ahead Of OPEC+ Meet
Russia Suspends Ban On Gasoline Exports Until June 30, Gov Says
Dell Deepens AI Push With New PCs, Nvidia-Powered Servers
GSK Faces Whistleblower Suit From Lab That Found Zantac Risk
Rio Tinto Invokes Force Majeure On Australian Alumina Sales
Samsung Elec. Picks Vet Exec To Tackle ‘Chip Crisis’ Amid AI Boom

FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0800 (631M), 1.0840-50 (2.1BLN), 1.0860 (320M), 1.0900 (942M)
USD/CHF: 0.9055 (1.9BLN), 0.9100 (383M). EUR/CHF: 0.9850 (898M)
GBP/USD: 1.2600 (210M), 1.2625-30 (718M)
EUR/GBP: 0.8600 (433M), 0.8650 (200M)
AUD/USD: 0.6565-75 (1.6BLN), 0.6650 (226M), 0.6675 (200M), 0.6705-15 (511M)
AUD/NZD: 1.0850 (304M). EUR/AUD: 1.6300 (200M)
USD/CAD: 1.3600 (460M), 1.3640-45 (1.4BLN), 1.3700 (1.3BLN)
USD/JPY: 154.50 (795M), 156.75 (295M), 157.00 (400M), 157.75 (590M)
AUD/JPY: 102.75 (330M)

CFTC Data As Of 17/05/24

Japanese yen net short position is -126,182
British pound net short position is -20,075
Euro net long position is 17,155 contracts
Swiss franc posts net short position of -41,107
Bitcoin net short position is -177 contracts
Equity fund managers raise S&P 500 CME net long position by 60,168 contracts to 920,863
Equity fund speculators increase S&P 500 CME net short position by 40,882 contracts to 279,337
Gold NC Net Positions: $204.5K vs $199.6K

Technical & Trade Views

SP500 Bullish Above Bearish Below 5280
Daily VWAP bullish
Weekly VWAP bullish
Below 5258 opens 5200
Primary support 5160
Primary objective is 5379
EURUSD Bullish Above Bearish Below 1.08
Daily VWAP bullish
Weekly VWAP bullish
Above 1.10 opens 1.11
Primary resistance 1.0981
Primary objective is 1.0550
GBPUSD Bullish Above Bearish Below 1.2630
Daily VWAP bullish
Weekly VWAP bullish
Below 1.2600 opens 1.2540
Primary support is 1.2443
Primary objective 1.2776
USDJPY Bullish Above Bearish Below 152
Daily VWAP bullish
Weekly VWAP bullish
Below 154.40 opens 152
Primary support 152
Primary objective is 165
XAUUSD Bullish Above Bearish Below 2376
Daily VWAP bullish
Weekly VWAP bullish
Below 2330 opens 2240
Primary support 2260
Primary objective is 2560
BTCUSD Bullish Above Bearish below 65500
Daily VWAP bullish
Weekly VWAP bullish
Above 70500 opens 78500
Primary support is 65000
Primary objective is 78500

How will this affect me?

Based on the latest market outlook and data, individuals with investments in Asian markets may experience fluctuations in their portfolios due to the recent pause in the seven-day winning streak. Additionally, individuals in the UK may be impacted by the upcoming CPI inflation report and the potential implications for interest rates set by the Bank of England. Furthermore, those with exposure to the Eurozone may see changes in trade surpluses based on import cost fluctuations.

How will this affect the world?

The broader impact of these market developments could lead to shifts in global trade dynamics, especially with regards to Asian markets and the Eurozone. Changes in interest rates by central banks like the Bank of England could have ripple effects on global financial markets and investment strategies. The overall economic outlook may also be influenced by factors such as inflation rates and trade surpluses in key regions.

Conclusion

As the daily market outlook evolves, it is essential for individuals and businesses to stay informed and adapt their strategies accordingly. The current trends in Asian markets, UK inflation data, and global trade dynamics highlight the interconnected nature of the financial world. By closely monitoring these developments and understanding their potential impact, investors can make more informed decisions to navigate the ever-changing landscape of the global economy.