Daily Market Update Jun 10

The equity indices finally resolved their trading range but unfortunately for the bulls…to the downside. All sectors closed in red with communications (-3%), tech (-2.68%) and financials (-2.5%) leading the losers. SPX was battling for the last week to break the 4150-4175 resistance but didn’t manage to break free and finally ended Thursday trading session approx. 2.4% down in the biggest one day drop in the last 3 weeks ending the day just above the 4000 level.

Nasdaq Index was down a little more to close slightly above the 12250 level. Big tech – Apple, Amazon and meta platforms were all down more than 3% on the day. 4000 and 12000 levels on SPX and NDX indices respectively are now the important psychological levels to the downside.

Chinese equities were also in focus as BABA fell more than 8% as Shanghai seems to have reimplemented lockdowns and regulators also squashed rumours of revival of an Ant Group IPO.

The dollar gained versus all of the major G10 currencies amid signs of a pickup in demand for haven currencies.

The yen and Swiss franc also outperformed most of their peers. Treasury yields were higher on the day as well with almost all major curve points on the US treasury yield curve are now at a one month high with 10 yr above the 3% level.

?Meanwhile Inflation continues to dominate headlines as in a widely anticipated move the ECB committed to a July rate hike yesterday after significantly upping its inflation forecast. Though as expected, ECB didn’t make any change to the deposit rate (which is -0.5% right now) yesterday but communicated they were prepared to hike by 25bps next month and again by either that amount or even do a 50bps hike in September if inflation which now is exceeding 8% in the Euro area warrants a tougher stance.

There were also cuts to the growth outlook, 2022's forecast was lowered to 2.8% from 3.7% and 2023's to 2.1% from 2.8%. European equities dropped to the lowest in a week over fears that steps the ECB will take to reign in inflation could pressure valuations. Also to note is that ECB will also be ending its net assets purchases starting July. German 10 year bunds gained almost 7bps.

?In other inflation news, US gas prices topped $5 nationally this week as countries globally continue to struggle to handle high energy prices.

We have the closely watched CPI in US today where data is expected to show that consumer prices picked up from a month ago but eased slightly from a year earlier. Expectation is for a YoY to come out at 8.2% which will be a slight drop from the April YoY reading of 8.3%. However important will be to see the MoM change as well as the annualized 3M change of the number as well.

?Have an awesome Friday and a good weekend!

If stock market experts were so expert, they would be buying stock, not selling advice. – Norman Ralph Augustine