Global Economic Daily - 25/07/2024
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Quote of the Day: We live in a rainebow of chaos. – Paul Cezanne
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Equities: Stocks sold off Wednesday, weighed down by underwhelming reports from two megacap tech companies, leading the?S&P 500?and the?Nasdaq Composite?to post their worst session since 2022. The broad market index lost 128.61 points, closing at 5,427.13, while the tech-heavy Nasdaq 100 slid 721.95 points to end at 19,032.39. The?Dow Jones Industrial Average?shed 504.22 points closing at 39,853.87. Those reports mark investors’ first look at how megacap companies fared during the second quarter. Reports from these names are of special interest to Wall Street as this small cohort is responsible for the bulk of this year’s gains. Wednesday’s sell-off was caused by a perfect storm of an overbought market, high bar for earnings and a seasonally weak period for equities. That is why this pullback has not come as a total surprise to investors. Despite these misses from the megacap tech titans, the earnings season overall is off to a strong start. More than 25% of?S&P 500?companies have reported their second-quarter earnings, with roughly 80% of them topping expectations. Adding to investor concerns Wednesday morning was?weaker-than-expected U.S. manufacturing data. The U.S. PMI flash manufacturing output index fell to 49.5 in July, unexpectedly slipping into contraction territory as new orders, production and inventories declined. Economists had forecast a reading of 51.5, according to Dow Jones. A Wednesday report also showed new home sales came in?lighter than economists had expected?for the month of June. TECHNICAL OUTLOOK – Both the Dow and S&P are now below the 14, 21 day moving average.
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Crude Oil: Oil prices settled higher on Wednesday, supported by large declines in U.S. crude and fuel stocks, but hovered close to their lowest level in six weeks due to concerns over weak global demand. Prices snapped three straight sessions of decline on falling U.S. crude and fuel inventories, as well as growing oil supply risks from Canadian wildfires. U.S. crude inventories fell by 3.7 million barrels last week, the Energy Information Administration said. U.S. gasoline stocks dropped by 5.6 million barrels, compared with analysts' expectations for a 400,000 draw. Distillate stockpiles, which include diesel and heating oil, fell by 2.8 million barrels versus expectations for a 250,000-barrel increase, the EIA data showed. However, the market remained wary about global summer demand. U.S. oil refiners are?expected to report?sharply lower second-quarter earnings versus a year ago after a listless summer-driving season weakened refining margins. Prices are under pressure from ceasefire talks between?Israel and Hamas?and continued concern that the economic slowdown in China, the world's biggest crude importer, would weaken global oil demand. Crude-oil deliveries to India, the world's third-biggest oil importer and consumer, also slipped in June to their lowest since February. Buoying prices, wildfires in Canada forced some producers to curtail production and threatened a large amount of supply. Imperial Oil?said it has?reduced non-essential staff?at its Kearl oil sands site as a precaution. Meanwhile,?Russia's energy ministry pledged?to stick to the crude-output quota set by the OPEC+ group in July, after its June production exceeded limits. TECHNICAL OUTLOOK – The Crude is below the 14, 21 day moving average.
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Metals: Gold prices are trading double-digits higher and silver slightly up in midday U.S. trading Wednesday. Bullish daily “outside-market” forces are boosting buying interest in the precious metals: a lower U.S. dollar index, sharply lower U.S. stock index prices, and higher crude oil prices. U.S. Treasury yields have also stabilized this week, which also leans a bit friendly for the precious metals market bulls. Technically, August gold bulls still have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $2,488.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,300.00. September silver futures bulls have the slight overall near-term technical advantage but have faded badly recently. Silver bulls' next upside price objective is closing prices above solid technical resistance at $31.00. The next downside price objective for the bears is closing prices below solid support at $28.00. TECHNICAL OUTLOOK – Gold is above the 14, 21 day moving average, while silver is now below.
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