General Market Analysis 12/07/2024

Markets Rocked After CPI Miss – Nasdaq Down 2%

US CPI data came in lower than expected yesterday and markets reacted strongly as hopes for a September rate cut increased. US tech stocks to a big hit with the Nasdaq dropping 1.95% on the day, followed by the S&P which lost 0.88% while the Dow managed a slight 0.08% increase. US treasury yields dropped lower, the benchmark 10-year losing 7.6 basis points to trade back to 4.204% and the more rate sensitive 2-year losing 12.6 basis points to fall back to 4.506%. Currencies also saw big moves as the greenback took a beating, the dollar index losing around 0.6% on the day with UsdJpy notably dropping over 2% on the data. Oil prices rose in line with the weakening dollar, Brent up 0.4% to $85.40 a barrel and WTI up 0.6% to $82.66. Gold was another big mover on the day, breaking through resistance levels to add another 1.8% and move back towards all-time highs, it closed the NY session at $2,422 an ounce.

Gold on the Move to Record Highs

Last night’s lower than expected CPI data release in the US led to another strong round of dollar selling across financial markets and Gold was once again one of the main recipients of the greenback’s downfall. The precious metal gained another 1.8% during the New York session and that comes on the back of a strong upward trend throughout the month. The stars are now aligning for a move to challenge May’s record all-time highs as a greater chance of rate cuts in the US combine with a large dose of global political uncertainty to pull more investors into long gold positions. From a technical perspective, the breakthrough of both trendline resistance and the monthly high now opens the way for a move back to high just under $2,450 and a move through there pushes it into fresh territory.

Quiet Calendar Day Ahead, but Volatility to Remain High

Traders are expecting to see further volatility across financial markets today even with a limited macroeconomic risk event calendar. Excessive moves in the Yen have Asian FX traders on their toes already in early trading this morning and expectations are for more moves in the sessions ahead. There is very little on the calendar in both of the first two trading sessions today, but we have further inflation numbers in the US later on when the PPI data sets are released. They are not expected to have anywhere near the impact of last nights CPI data but will still be a factor that investors look to for the overall inflation story. The Preliminary University of Michigan Consumer Sentiment and Inflation Expectations are out later in the day as well, but overall most investors are expecting yesterday’s CPI print to continue to dominate market sentiment into the weekend.

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