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When copper futures eyed a push above $5 per pound in May, it looked like we were starting to witness one of the breakout trades this decade. However, the hype quickly died down as price fell sharply towards the end of May and that led to another 5% drop in June. The slight rebound earlier this month has been dashed and copper is down almost 5% again in the last four days:

A key thing to note in the fall this week is that price is breaking below the 100-day moving average (red line) for the first time since February. That’s a big blow to the buying momentum and frees up room for a steeper decline. Now, the June low at $4.31 will be eyed before going back to support from the Fib levels above.

Fundamentally, the factors driving copper prices higher this year hasn’t changed too much. The drive for the green transition and supply concerns were key reasons in providing a tailwind for copper.

But at the same time, copper tends to correlate with the health of the global economy. And the outlook for the latter has been struggling, especially with the major slowdown in China since last year. For some context, China buys roughly 40%-50% of the newly mined copper each year. So, that’s a major demand source.

From a structural perspective, I believe that copper still has some bullish underlying factors going for it. But it might have to wait until after the summer for that to show up in the price. That as well as the technicals providing some supportive factor for buyers to step back in.

Looking at the seasonal pattern, August has been the worst month for copper over the last 20 years. So, that’s one reason to stay guarded for at least the next few weeks.

This article was written by Justin Low at www.forexlive.com.

I noted at the time that the price action was not as clear cut as what we saw from last week. And the BOJ accounts (as seen below) are now reaffirming that, suggesting that the Japan MOF might not have played a key role in driving USD/JPY lower yesterday.

Typically, the circled column should show a net receipt instead, which was the case in calculating the roughly ¥6 trillion spent on intervention on Thursday and Friday last week. And also similarly back in May here.

This article was written by Justin Low at www.forexlive.com.

• To adopt resolution on further deepening reform comprehensively
• Must consciously place reform in a more prominent position
• Reform tasks set out in this decision to be completed by 2029
• Will implement measures to prevent, defuse risks in key areas such as real estate, local government debt, and small and medium-sized financial institutions
• Will raise the level of party’s leadership in further deepening reforms across the board and promoting Chinese-style modernisation
• To further coordinate reforms in key areas such as finance and taxation
• To deepen the reform of foreign trade system
• To carry out social security risk prevention and control network, effectively maintain social stability
• To deepen the reform of management system for foreign, outbound investments
• Will deepen supply-side structural reform, establish and development new growth drivers

The pledges offered here are what you would expect, being very on the surface and involving a more macro-oriented outlook. They did make mention on reforms to curb debt risks and trying to bolster key economic areas. But markets might be more comforted if there were more specifics instead.

For now, this will have to do. I would argue that the lack of details would do little to bolster market confidence. But then again, China has a knack for wanting to look after their image. They already set out more short-selling curbs ahead of the Third Plenum this week to make this all “look good”.

This article was written by Justin Low at www.forexlive.com.

Dollar pairs are lightly changed with narrow ranges returning in trading today. The only exception on the day is USD/JPY. But even then, the pair is also near flat at around 156.20 levels now amid some light pushing and pulling. The low earlier came in Asia, with the pair touching 155.36 before returning above the 156.00 mark now.

The inaction today comes as equities are also finding a calmer mood. US futures are briefly pared its early advance in the opening hour of European morning trade but S&P 500 futures are holding up 0.1% for now. That is keeping broader markets on edge, with eyes on whether the selloff in tech will carry over again in US trading later.

But for now, it looks like it might be a bit of a wait until we get to the ECB and then the US weekly jobless claims data.

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.3%
• Germany DAX +0.1%
• France CAC 40 +0.5%
• UK FTSE +0.9%
• Spain IBEX +0.5%
• Italy FTSE MIB +0.3%

The selloff in tech shares yesterday weren’t too impactful for European indices, as they are less concentrated in that area in general. And the rotation into the Dow is arguably a net positive reflection for European stocks at the balance. In any case, US futures are pointing to a calmer mood as well with S&P 500 futures up 0.3% and Nasdaq futures up 0.6% currently. For French stocks, the consolidation phase continues after the June plunge:

This article was written by Justin Low at www.forexlive.com.

Via a note from JPM on oil ICYMI:

• estimate the equilibrium price of WTI oil at around $70/bbl
• even at $60/bbl, WTI prices are too low to incentivize
  production, potentially leading to a spike to $100/bbl in following
  year

This article was written by Eamonn Sheridan at www.forexlive.com.

• Specifics of monetary policy are up to the BOJ to decide
• BOJ monetary policy is not aimed at guiding FX levels
• Closely monitoring FX market

The usual stuff from Japanese officials amid their many verbal jawboning. But no doubt they can be happier a bit with USD/JPY sliding back to 156.00 currently, though off the earlier low today of 155.36.

This article was written by Justin Low at www.forexlive.com.

This is due to the fact that the Labour Force Survey (LFS) has been experiencing a fall in response rates and some quality challenges as a result. The idea put out by the ONS is to transition to a Transformed Labour Force Survey (TLFS), in order to improve the quality of the labour market data based on a more adaptive and responsive survey.

But so far, the change has not quite materialised with the progress running into a few bumps in the road.

ONS notes that there are “challenges that remain before we are able to transition confidently and securely”. Adding that “there are issues that remain before we can transition and further steps are required so that the TLFS can reach the quality necessary for users”.

In the meantime, they will continue to use the LFS as the lead measure of the labour market. And therein lies the caveat when it comes to the latest UK labour market data still. No doubt it is still the best gauge that we have on things but it isn’t quite of the same quality and assurance as it was before, and the BOE has also acknowledged that.

As such, it is something worth taking note and keeping in mind. ONS says that they might only be able to switch things up early next year. So, we’ll see.

This article was written by Justin Low at www.forexlive.com.

• German DAX futures +0.1%
• UK FTSE futures +0.4%

For European indices, they are less affected by the selloff in tech shares in Wall Street. Adding to that, the rotation play into the Dow is arguably a net positive for overall sentiment for European stocks too – which ended in a more mixed showing yesterday. US futures are also looking calmer today, with S&P 500 futures up 0.2% and Nasdaq futures up 0.5%.

This article was written by Justin Low at www.forexlive.com.

The post Ex-Dividend 19/07/2024 first appeared on IC Markets | Official Blog.

Global Markets:

•  Asian Stock Markets : Nikkei down 2.51%, Shanghai Composite up 0.32%, Hang Seng up 0.51% ASX down 0.27%
• Commodities : Gold at $2469.5 (0.47%), Silver at $30.61 (0.84%), Brent Oil at $85.13 (0.57%), WTI Oil at $81.99 (0.71%)
• Rates : US 10-year yield at 4.169, UK 10-year yield at 4.110, Germany 10-year yield at 2.418

News & Data:

• (USD) Building Permits  1.45M vs 1.40M expected
• (USD) Housing Starts  1.35M vs 1.30M expected

Markets Update:

Asia-Pacific markets declined sharply due to a fall in chip-related stocks following stricter U.S. export restrictions and comments from former U.S. President Donald Trump, increasing geopolitical tensions. Japan’s Nikkei 225 fell by 2%, and the Topix index decreased by 1.17%. Tokyo Electron shares dropped around 10%, with other chip-related stocks like Advantest and Organo falling nearly 5% and 3%, respectively. South Korea’s Kospi index dipped by 1.26%, and the small-cap Kosdaq lost 0.9%, with Samsung Electronics down nearly 2%.

Taiwan Semiconductor Manufacturing Company (TSMC) shares dropped more than 3%, leading the Taiwan Weighted Index to fall by 2%. The Nasdaq Composite in the U.S. fell nearly 2.8% overnight, marking its worst day since December 2022, as investors favored rate-sensitive stocks over large tech companies amid hopes for possible rate cuts following Federal Reserve Chair Jerome Powell’s comments on maintaining higher rates for longer.

In Asia, Japan’s latest trade data showed exports increased by 5.4% year on year in June, down from 13.5% in May, while imports grew by 3.2%, down from 9.5% in May. Both exports and imports missed expectations. Japan’s trade balance shifted from a 1.2 trillion yen ($7.7 billion) deficit in May to a 224 billion yen surplus. Hong Kong’s Hang Seng index and China’s CSI 300 were exceptions, with stocks rising by 0.5% and 0.31%, respectively.

Australia’s S&P/ASX 200 declined by 0.27% after the unemployment rate rose slightly to 4.1% in June. Employment increased by around 50,000 people, while the number of unemployed rose by 10,000. In the U.S., the Dow Jones Industrial Average gained 243.60 points, or 0.59%, to close at 41,198.08, while the S&P 500 fell by 1.39%, with the information technology and communication services sectors being the weakest performers.

Upcoming Events: 

• 12:15 PM GMT – EUR Main Refinancing Rate
• 12:15 PM GMT – EUR Monetary Policy Statement
• 12:30 PM GMT – USD Unemployment Claims
• 12:30 PM GMT – USD Philly Fed Manufacturing Index
• 12:45 PM GMT – EUR ECB Press Conference

The post Thursday 18th July 2024: Asia-Pacific Markets Plunge on Chip Stock Declines first appeared on IC Markets | Official Blog.

• Prior 4.4%
• Employment change 19k v s 18k expected
• Prior -140k
• June payrolls change 16k
• Prior -3k; revised to 54k
• May average weekly earnings +5.7% vs +5.7% 3m/y expected
• Prior +5.9%
• May average weekly earnings (ex bonus) +5.7% vs +5.7% 3m/y expected
• Prior +6.0%

The jobless rate held steady in the reported month with nominal earnings also easing slightly in the three months to May. The report doesn’t really change much of the picture for the BOE, even with the better revision to the payroll numbers in June. Do keep in mind as well that ONS is still trying to transition the labour market data into a more accurate survey, which still hasn’t happened. So, it’s tough to extrapolate too much from the data at the moment.

If anything else, real earnings continues to pick up and that might be a concern for the central bank. Here’s the trend:

This article was written by Justin Low at www.forexlive.com.