Yesterday, the financial markets experienced significant volatility. Major indices closed sharply lower, reflecting a broad sell-off. The US Dollar Index initially surged before entering a corrective phase. Bitcoin also faced a correction and is expected to test lower support levels.
Economic Events:
The US economy grew at an annualized rate of 1.6% in Q1 2024, a sharp decline from the previous quarter’s 3.4% and below the projected 2.5%. This marks the slowest growth since early 2022. The deceleration was primarily due to weaker consumer spending, which fell to 2.5% from 3.3%, with a notable drop in goods consumption. Non-residential investment growth also slowed, though equipment investment rebounded. Government spending growth was modest, while exports fell significantly, and imports surged. Conversely, residential investment showed a strong double-digit increase.
BOND:
The yield on the US 10-year Treasury note climbed to over 4.63% on Wednesday, the highest level since early May. This rise triggered a sell-off in global government bonds, driven by robust macroeconomic conditions and persistent inflation concerns. Recent comments from Federal Reserve officials suggested that further positive inflation data is needed before considering rate cuts, with another rate hike still a possibility. This sentiment contributed to weaker performance in recent Treasury auctions and increased market expectations for the Fed to maintain its current rate stance through September.
Gold (XAUUSD):
Gold prices fell to around $2,330 per ounce on Thursday, continuing their decline amid rising US Treasury yields and increased demand for the US dollar. Fed officials’ hawkish comments, emphasizing the ongoing inflation risks, have weighed on gold. Investors are now looking forward to the second estimate of GDP figures and the key PCE inflation report due later this week, which will provide further insights into the Federal Reserve’s policy direction.
Silver (XAGUSD):
Silver prices held steady near $32 per ounce, trading at their highest level in 11 years. The metal’s strong performance relative to gold was supported by industrial demand and a favorable economic backdrop. Despite delays in expected monetary easing by the Fed, silver benefited from lower opportunity costs and increased central bank interest. Additionally, demand for solar panels, driven by volatile power prices, has underpinned industrial demand for silver, reflected in the strong performance of solar equities.
US30:
US stock futures declined on Thursday, with Dow futures down 0.7% and S&P 500 and Nasdaq 100 futures each falling about 0.4%. The decline was led by a significant drop in Salesforce shares following disappointing revenue and weak guidance. Other stocks, including American Eagle Outfitters, also fell on lower-than-expected earnings. On Wednesday, major indices closed lower, driven by rising Treasury yields and strong consumer confidence data, which added to bearish market sentiment. Investors are now focusing on upcoming economic data and earnings reports.
EURUSD:
The euro remained stable around $1.086, slightly below the two-month high of $1.088 reached on May 15th. Market participants continued to evaluate the European Central Bank’s (ECB) policy outlook. German inflation data for May exceeded expectations, hinting at persistent inflationary pressures that may influence the ECB’s rate decisions. Meanwhile, hawkish signals from Fed officials have tempered expectations of a US rate cut by the third quarter, adding pressure on the euro.
US Crude Oil WTI :
WTI crude oil prices remained near $79 per barrel on Thursday, following a nearly 1% decline in the previous session. The market was weighed down by concerns over prolonged high borrowing costs, which dampen the demand outlook. On Wednesday, commodity markets sold off, and bond yields spiked as traders speculated that the Federal Reserve might delay any rate cuts. Meanwhile, industry reports indicated a decline in US crude and gasoline inventories, with distillate stocks rising. Investors are also anticipating the upcoming OPEC+ meeting, where supply cuts are expected to be maintained, though any deviation could pressure oil prices.
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