Midweek market wrap: FX, stocks, and more!
It’s been a tumultuous week in the markets as China’s COVID woes escalated into mass protests. The country is on the verge of yet another strict lockdown, sending jitters throughout the markets. A shutdown in China will hamper an already strained global economy.
Today, we take a look at global market trends and provide trading opportunities for all traders.
China’s COVID woes
Workers in the Chinese manufacturing hub of Guangzhou clashed with Chinese authorities, the latest in a string of protests in November over the weekend over stringent COVID-19 lockdowns.
The clashes erupted as China posts record numbers of daily COVID cases.
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In Zhengzhou, the site of the huge Foxconn factory producing Apple iPhones have also been affected.
China is a major manufacturing and trade hub. Throughout 2022 the country has implemented strict lockdowns as it hopes to curb its COVID issues.
The global economy needs to find a more solid footing before stock markets can recover 2022 losses, reports a Reuters poll of market strategists.
Global markets are facing the dual problem of high inflation and the most aggressive rate of interest rate hikes on record.
Analysts have reduced their 12-month predictions compared to three months ago for most of the 17 global indexes.
Asked how long the current downturn would last, 70% of the majority said it would be at least another three months, reports the Reuters poll.
Most of the 17 stock indexes covered in the Reuters polls predicted single-digit gains by the end of 2023. This won’t be enough to cover the 2022 year-to-date losses.
Any hope of recovery will depend on how much longer global central banks can increase interest rates.
High consumer price inflation is curbing global economies, pushing many nations, including the US, towards recession.
More news by market sector:
Alon Roslyakov, CMTrading South Africa Office Manager, shares his veteran insight into market sectors below:
Futures are pointing to a higher open this morning after the market slid to start the week, continued unrest surrounding China’s zero covid policy along with fears over potential lockdowns and manufacturing delays from the country had investors comfortable with taking a step back from the markets on Monday. Overnight, a Chinese official told reporters that 65.8% of people over the age of 80 had received booster shots. On top of that, the government reported the first decline in Covid infections within a week. The seemingly positive developments have Chinese ADRs back in positive territory in early trading.
In the FX market, Consumer prices in Germany observed an annual rise of 10.0% in November, which is slightly lower than the 10.3% that analysts projected. On a monthly level, consumer prices declined by 0.5%.
With the upcoming events in the markets, we look towards the EURUSD as both the Eurozone and the U.S. have key announcements being made the rest of the week. This will be followed by high levels of volatility creating excellent entry opportunities for traders.
Currently, the Euro is moving back into a high-volume zone. The strong negative movements since Monday together with some negative impact events from the week ahead for the Euro or positive news for the dollar may provide the catalyst for a further move back down to parity with the dollar.
Palladium continues to consolidate after the negative movement seen from Friday last week on the back of Chinese protests. China is the world’s largest metals and commodities importer, including palladium, with prices reacting rapidly to Chinese developments.
Technically palladium is bouncing off its support line at1806. Negative influences on the dollar can see the commodity break its consolidation with a bullish run back up to the 2000 to 2025 price levels.
The S&P 500 hovered around the flatline on Tuesday as traders struggled to recover from sharp losses suffered in the previous session. The major averages suffered steep losses Monday, with the Dow dropping nearly 500 points. The S&P 500 and Nasdaq each lost more than 1%, after protests in mainland China against the country’s zero-Covid policy started over the weekend. This led to worries over the potential for Chinese Covid protocols could once again hamper global supply chains.
The US 500 looks to retest the consolidation range between 3940 and 3960. Key announcements such as US GDP data and Fed Powell’s speech on Wednesday will the index breakout from the range to the downside support of 3840 or with a hawkish statement from Fed Powell, move to its monthly peak of 4040.
Big news in the crypto world as the FTX catastrophe claimed its next victim Monday as crypto exchange BlockFi filed for bankruptcy. In a regulatory filing filed with a New Jersey court, BlockFi said it had assets and liabilities worth between $1 billion and $10 billion. BlockFi was supposedly “rescued” through an FTX merger deal worth up to $240 million. However, it halted withdrawals days after November 11, when news of the FTX implosion came out. After a rapid plunge in all crypto after the news was announced, most of the market has recovered its impulsive losses back to levels before the news. SHIB/USDT however has seen some relative weakness compared to the rest of the market. Any added negative news or strength in the dollar could present an excellent short position for traders.
The week ahead
Important economic data to look to this week with Australian CPI figures, Chinese Manufacturing PMI, Eurozone CPI, US GDP figures, and most importantly Fed’s Chair Powell speech all occurring on Wednesday. Thursday and Friday saw US Ism Manufacturing PMI and Non-farm payrolls coming out respectively.
Traders this week are spoilt for choice with multiple extremely high-impact events on the horizon, presenting large movements across all markets with profit-taking opportunities.
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