Daily summary: S&P 500 slips from record after Powell cautions on inflation

8:24 PM October 22, 2021

  • European equities end week on bright note
  • US stocks pull back after Powell speech
  • Gold caps gains as dollar pares losses
  • Renewed tension between UK and EU
  • Bitcoin fell to $60k level

European indices finished the week higher, with the German DAX finishing 0.5% higher and the pan-European Stoxx 600 adding 0.6%, as concerns over a potential debt crisis in Chinese property market eased after Evergrande made a $83.5 million payment to bondholders, averting a default at least for now. Also solid quarterly figures lifted market sentiment. L’Oreal stock rose more than 5.0% after strong Q3  growth figures, while Renault maintained its full-year operating margin guidance despite higher estimated losses in the second semester and after posting a 13.4% drop in Q3 revenues to €9 billion. On the data front, Eurozone flash composite PMI dropped to a 6-month low of 54.3, reflecting the impact of soaring prices in Europe’s private sector.

The US indices are retreating from their all-time highs after Fed Powell comments. The Fed chairman announced that the US central bank is ready to start tapering and that the current level of inflation is above the target. However, the FED does not intend to raise interest rates in the near future. Powell largely stuck to his views that inflation was of a temporary nature, but between the lines he showed that he is taking into consideration that inflation pressure may be higher than expected. Meanwhile the largest social media companies in the US are trading under increased pressure. Snap shares are losing more than 25% today, after the company released mixed quarterly results and poor revenue forecasts for the current quarter. Negative sentiment spilled over the whole sector and as a result Facebook stock fell 5.5%, Twitter lost 4% and Pinterest dropped over 4.0%.

The US dollar appreciates against other currencies. This is mainly due to the reaction to Powell comments. The GBPUSD pair fell due to renewed tensions between the UK and the EU over the Ireland border.

GBPUSD pair broke below long-term upward trendline during today's session after news that the EU is considering terminating the Brexit trade deal if the UK rift on the Irish border deepens. However buyers managed to halt declines at 1.3738 support which coincides with 23.6% Fibonacci retracement of the last upward wave and lower limit of the 1:1 structure. Should break lower occur, next Fibonacci retracement should be considered as a nearest support. Meanwhile the nearest resistance is located around 1.3836.  Source: xStation5

The global cryptocurrency market has shrunk by 1.73% today, the current capitalization is around $ 2.53 trillion. On Friday, Bitcoin fell by 3%, however sellers struggled to break below $60,000 level. Bitcoin extends yesterday's declines as enthusiasm surrounding the launch of the new ETF seems to be waning. Ethereum dropped nearly 3%, thus shaping the double top formations on the chart.

The price of gold and silver rose sharply at the beginning of the session, but buyers failed to break above the highs from the beginning of September. As a result, precious metals prices pulled back sharply in the evening, erasing most of today's gains. Crude oil and natural gas prices rose1.5% and 2% respectively, thus fully recovering from yesterday's losses. The commodities market is digesting recent information the Chinese government has already started to intervene in the coal market aiming to cool the prices.

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