Global stocks retreat ahead of Fed minutes and retail earnings
European equities and American futures retreated as the market remain fixated on inflation and earnings. In Europe, the DAX, CAC 40, and Stoxx 50 declined by more than 0.20% while in the United States, the Dow Jones, S&P 500, and Nasdaq 100 indices declined by more than 0.20%. This performance is because of worries that inflation will force central banks to start tightening.
Further, with the earnings season coming to an end, there are concerns about whether companies can maintain the momentum. According to FactSet, 91% of S&P 500 companies have already published their results. Of these 86% of them reported a revenue surprise. This was the fastest growth since 2008 when FactSet began collecting the data. This week, the focus will be on earnings from companies in the retail industry like Walmart, Kohls, Target, and Home Depot.
The Australian dollar and Chinese yuan weakened slightly after the relatively weak Chinese retail sales numbers. According to the country’s statistics agency, the overall sales rose by 17.7% in April, down from the previous month’s increase of 34.2%. In the same period, industrial production slowed from 14.1% to 9.8% while fixed assets rose by 19.9%. The Australian dollar also weakened because of the falling iron ore prices. The prices have retreated after Chinese officials warned against market manipulation. This is important for the Australian dollar because iron ore is the country’s biggest export.
Other top movers today were the Japanese and Swiss producer price index (PPI) data. According to Japan’s statistics department, producer prices declined from 1.0% in March to 0.7% in April. This led to an annualized increase of 3.6%, higher than the previous 1.2%. In Switzerland, the PPI increased from 0.6% in March to 0.7% in April. On a YoY basis, the PPI rose by 1.8%. These numbers show the impact of the recent rally of commodities on companies. Meanwhile, in the corporate world, the biggest story was the planned merger of Warner Media and Discovery to create a $150 billion streaming giant.
The EUR/USD pair rose to an intraday high of 1.2150, which was higher than Friday’s low of 1.2050. On the four-hour chart, the price has moved above the lower side of the ascending wedge pattern. It has also moved above the 25-day moving average (MA) while the Relative Strength Index (RSI) has moved from Friday’s low of 35.85 to the current 65. It is also approaching the upper side of the Bollinger Bands. Therefore, the pair may keep rising as bulls target the upper side of the wedge at 1.2185.
The EUR/GBP pair was little changed today as traders wait for the upcoming GDP and inflation data from the UK and EU. The pair is trading at 0.8622, which is at the same level as the 25-day moving average. The pair has also formed a bearish flag pattern while the Relative Strength Index (RSI) has moved from 27 to 56. Therefore, the pair may resume the downward trend since the bearish flag pattern is usually a bearish signal.
The USD/JPY pair is trading at 109.20. On the hourly chart, the pair has formed a narrow downward trend that looks like a bullish flag. The pair is slightly below the 25-day and 15-day moving average. The signal and histogram of the MACD are slightly below the neutral line while the Relative Strength Index (RSI) has formed a bearish divergence pattern. The pair may soon break out higher ahead of the upcoming Japan GDP data.