- Fears of early Fed tapering weigh on market sentiment
- Jobless claims hit a new pandemic-era low
- Commodities extended recent declines
European and US indices fell sharply during today's session as Minutes from July's FOMC meeting raised even more concerns that the Federal Reserve could remove stimulus this year. The market, which has got used to the cash flow that has been flowing for several months, reacted quite nervously. The declines can also be associated with concerns about another lockdown and economic slowdown. Speculation about the FED next steps only adds fuel to the fire, as cutting off cash when its economic recovery slows down does not seem like a good idea. Despite the negative sentiment, Wall Street has started to erase early losses. This is probably because the market knows that cash will still hit the market after introduction of the tapering, albeit in slightly smaller amounts.
Today's data from the US labor market showed a decreasing number of unemployed. The number of applications for unemployment benefits was the lowest since last March. The situation is expected to improve further with the expiration of all pandemic support programs in the US.
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RBNZ governor Orr said that if not for lockdown, interest rates would most likely have been raised. Orr said the goal is to bring rates to neutral levels within the next 18 months. However, due to the strong US dollar, NZD came under pressure today.
Commodity prices extended a recent decline as China is releasing its strategic inventories, thereby lowering commodity prices and cutting corporate costs when activity slows down. Copper price reached lowest level since April as all industrial metals declined. Precious metals also came under pressure. Gold fell 0.38 %, silver dropped 1%, Palladium plunged 4% and Platinum lost 2%. Brent crude extended losses for the 6th straight session in a row to the lowest since March below $66 a barrel while WTI is trading nearly 2.8% lower. Meanwhile, Goldman Sachs sees a smaller oil deficit this year than it was just a few weeks ago. Among agricultural commodities, Soybeans fell nearly 3% and reached their lowest level since the end of January while corn and wheat both fell over 2%. Sugar dropped over 1.5% and cocoa fell from a 3-month high to below $2,600/tonne. The price of gas fell after today's EIA report showed that inventories rose by 46 billion cubic feet, against an expectation of 31. In addition, the pipeline flow model predicted 33 billion cubic feet. This means that the demand was ultimately lower than initially expected.
NATGAS - price has broken below the first trendline and is now approaching the 50 SMA and uptrend line that started in April. Theoretically, a break below 50 SMA could generate a stronger downward move. Seasonality indicates a consolidation until the 1st week of September. This could even lead to a decline towards the 3.5 USD level. Source: xStation5