Fundamental And Technical Analysis Report

06 Dec

Fundamental And Technical Analysis Report – 06 December 2022

/ CSFX Analytics

As predicted, the RBA raises rates by 25 basis points

Asian stock market closes in red on Monday. The Shanghai Composite is up 0.13% at 3211.81 Overall, the Singapore MSCI is down 0.77% at 296.90. Over in Hong Kong, the Hang Seng Index is down 0.88% at 19518.19. In Japan, the Nikkei 225 is up 0.24% at 27820.40, while the Topix index is up 0.12% at 1947.90 South Korea’s Kospi is flat by 0.00% at 3211.81. Australia S&P/ASX 200 is up 0.33% at 7301.50.

Top News of the Day:

The Reserve Bank of Australia (RBA) raised its benchmark rate as expected on Tuesday and signalled that future rate hikes will depend largely on the path of inflation and economic growth as it seeks to keep the economy on “an even keel.”

The RBA raised its cash rate target by 25 basis points to 3.10%, meeting market expectations. The Australian dollar reacted positively to the move, rising 0.5% to 0.6733 against the dollar.

Tuesday’s hike, which is the RBA’s last meeting for the year, marks a cumulative raise of 300 basis points in 2022, as the central bank moved to combat rising inflation.

But the bank now expects inflation to rise even further in the near term, while economic growth is likely to slow. Consumer inflation, which grew at an annualized rate of 6.9% in November, is forecast to end the year at around 8%.

The RBA had slowed its pace of rate hikes in recent months, as it struggled to strike a balance between combating inflation and preventing economic destruction.

Market Summary as of 5/12/2022:

European equities Monday closing. The DAX futures contract in Germany traded down 0.56% at 14477.61, and CAC 40 futures were down 0.67% at 6696.96. UK 100 futures contract in the U.K. is up 0.15 at 7567.54.

In the U.S. on Wall Street, the Dow Jones Industrial Average closed down 1.40% at 33947.10. The S&P 500 is down 1.79% at 3998.84 and the Nasdaq 100 is down 1.93% at 11239.94, NYSE closes 1.85% down at 15474.79.

Top Market News Today:

In the Forex market, GBPUSD is down 0.01% at 1.2187. The USDJPY is up 0.33% at 137.21 The USDCHF is up 0.21 at 0.9443. EURUSD down 0.04% at 1.0488. EUR/GBP is up 0.05% at 0.8610. The USD/CNY is up 0.34% at 6.9855 at the time of writing.

In the Commodity market, U.S. Gold futures are down by 0.01% by $1,781.35. Elsewhere, Silver futures are up 0.37% at $22.492 per ounce, and Platinum is down 0.86% at $998.30. per ounce, and Palladium is up 0.33% at $1888.53.

Brent Crude Oil is up 0.60% at $83.18 per barrel.

In the Cryptocurrency Markets, Bitcoin is at 17008.80 up 0.26%, Ethereum is up 0.21% at 1262.04, and Litecoin is at 80.54 up 0.41%, at the time of writing.

Top Market Segment to Watch Out for Today:

GOLD: – Gold prices sank below key levels on Tuesday, with metal markets back under pressure as stronger-than-expected U.S. data boosted the dollar and ramped up uncertainty over strength in the U.S. economy and how the Federal Reserve will respond to it.

This could push the Fed into raising rates for longer than expected, especially if inflation remains stubbornly above the central bank’s target range. While the Fed has flagged smaller rate hikes in the coming months, the central bank also warned that rates could peak at many higher-than-expected levels.

Such a scenario would be negative for most non-yielding assets, with gold likely to be impacted the most. The central bank is now set to meet next week in its last meeting for 2022.

Economic News:

US: New orders for U.S.-manufactured goods increased more than expected in October amid strong gains in demand for machinery and a range of other goods, which could allay concerns of a sharp slowdown in manufacturing.

The Commerce Department said on Monday that factory orders jumped 1.0% after rising 0.3% in September. Economists polled by Reuters had forecast orders advancing 0.7%. Orders shot up 12.8% on a year-on-year basis in October.

The Federal Reserve’s fastest rate-hiking cycle since the 1980s as it battles inflation is dampening demand for goods, undercutting manufacturing, which is also being squeezed by the rotation of spending back to services.

An Institute for Supply Management survey last week showed its measure of the nation’s factory activity contracted in November for the first time in 2-1/2 years.

Manufacturing accounts for 11.3% of the U.S. economy. October’s jump in factory orders was driven by a 2.2% rise in bookings for transportation equipment, which followed a 2.3% increase in September. Transportation equipment orders were boosted by increases in orders for both defence and civilian aircraft. Motor vehicle orders rebounded by 1.7%.

Orders for machinery rose 1.5%. There were also solid gains in orders for computers and electronic products as well as electrical equipment, appliances and components.

The Commerce Department also reported that orders for non-defence capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 0.6% in October, instead of 0.7% as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 1.5%. They were previously reported to have jumped 1.3% in October.

Euro Zone: –

The European Central Bank will have to raise interest rates several more times to tame price pressures, even if headline inflation is now close to its peak, ECB chief economist Philip Lane told the Milano Fidanza.

“We do expect that more rate increases will be necessary, but a lot has been done already,” the paper quoted Lane as saying on Tuesday. “I would be reasonably confident in saying that it is likely we are close to peak inflation.”

Having raised rates by a combined 200 basis points (bps) since July to fight off record-high inflation, the ECB has signalled a slowdown in the pace of monetary tightening this month after back-to-back 75 bps point moves.

This points to a 50-bps hike in the ECB’s 1.5% deposit rate on Dec. 15 before a string of further moves in 2023 that could carry the deposit rate to the vicinity of 3%.

Lane did not explicitly endorse a 50 bps move over a bigger increase but repeated his case for a slowdown.

“We should take into account the scale of what we have already done,” said Lane, who makes policy proposals for the rate-setting Governing Council. “So, the basis for the decision will be different.”

At 10.0%, inflation may have already peaked but its decline will be slow over the coming months and upticks in early 2023 are still a possibility.

Top Economic Releases Today:

USD: EIA Short-Term Energy Outlook at 22:30
GBP: Construction PMI (Nov) Forecast 52.0, Previous 53.2 at 15:00
AUD: RBA Interest Rate Decision (Dec) Actual 3.10%, Forecast 3.10%, Previous 2.85% at 09:00
AUD: RBA Rate Statement at 09:00
CAD: Ivey PMI (Nov) Forecast 51.0, Previous 50.1 at 20:30