Early Morning Call: recession worries return; oil prices pare losses
Recession fears return hitting markets. Big late recovery on Wall Street saw SPX, NDQ close higher; Europe to open up after big declines; losses overnight in APAC. USD is king versus most currencies. Brent challenging $100.
Recession fears return, hitting markets
Once again, recession fears took over the markets yesterday.
On the equity front, Europe was the most affected, with the FTSE 100 and DAX down by nearly 3%.
It was also a negative session in the Asia-Pacific region. The Nikkei lost 1.20%. Australia’s ASX 200 was the best performer of the day, only losing 0.53%.
Volatility has now dropped after yesterday’s spike, and Europe indices are paring part of yesterday losses. Traders will look out for Topps Tiles at the open, after the group reported a 9.2% rise in sales, and AO World which is planning the placing of new ordinary shares at the price of 43 pence per share.
FX overview
On the FX market, the dollar was once again the risk-off currency of choice.
EUR/USD set a new two-decade low, GBP/USD hit $1.19 for the first time since March 2020, and AUD/USD set a new two-year low yesterday. The US Dollar Basket climbed up above 106 for the first time since December 2002.
In Germany, factory orders unexpectedly rose by 0.1% in May compared to April. Economist had forecast a 0.6% drop.
EUR/USD could be tested again tonight with the release of Federal Open Market Committee (FOMC) meeting minutes.
Also, at 10am, Eurozone retail sales are expected to rise by 0.4% in May on a month-on month (MoM) basis. Later this afternoon, traders await ISM non-manufacturing PMI, forecast to fall to 54.3 in June, from 55.9 in May.
Commodities outlook
The commodity market was not spared.
Oil prices tumbled yesterday afternoon. WTI lost $10 in a matter of five hours and is now hovering around $98.
Meanwhile, oil workers in Norway ended their strike after one day. The Norwegian government didn't take long to step in to avoid cutting the country's gas exports by almost 60% which would have worsened Europe's energy supply crunch. If the strike had continued, Britain would not have received any piped Norwegian gas from Saturday.
Yesterday the British wholesale gas price for day-ahead delivery jumped by nearly 16%.
Gold fell sharply yesterday, losing more than $40 and setting a new year-to-date low. Other precious metals followed suit, with silver falling back below $20 for the first time in two years, and platinum dropping to a 19-month low.
Renewed concerns on global growth sent industrial metals lower, as traders fear for demand. Copper now trades below $7,500 a tonne, a new 19-month low. Iron ore, aluminium and zinc were also impacted.
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