Global stocks rose on Friday as investors moved to buy the dip. In Europe, the German DAX rose by more than 1.3% after the positive results by Deutsche Telekom. The company’s net revenue for the quarter rose to 28 billion euros while its adjusted EBITDA jumped to 9.9 billion euros. In France, the CAC 40 index jumped by more than 1.5% while the Stoxx 50 moved upwards by 1.3%. These gains could be temporary because of the rising energy risks in the bloc. Natural gas prices have jumped sharply as investors react to the new sanctions by Russia. American stock futures rose even after Jerome Powell warned of the Fed’s policies. In a statement, he said that taming inflation will cause some pain. He said that taming inflation without causing a recession will depend on many factors outside the bank’s control. Nonetheless, he pointed that the bigger risk for the economy is a situation where inflation gets entrenched in the economy at high levels. The bank is expected to raise interest rates by 0.50% in the next two meetings and then shift to 25 basis points increases. Twitter came in the spotlight after Elon Musk announced that he was temporarily holding his purchase of the firm. Cryptocurrency prices attempted to rebound after the spectacular decline that happened this week. The rebound is in line with the performance of stocks. Bitcoin moved just above $30,000 while Ethereum moved above $2,000. Still, Terra LUNA, the coin that was trading at $119 a few months ago, continued falling as the validators stopped working. The token is now trading at $0.0067 while UST, which is its stablecoin has fallen to $0.10.  ETH/USD The ETHUSD pair rose slightly as investors bought the dip. The pair is trading at 2,077, which is the highest it has been since Wednesday. On the four-hour chart, the price is still slightly below the 50-day moving average while the Relative Strength Index (RSI) has moved above the oversold level. The MACD made a bullish crossover. Therefore, the pair will likely resume the bearish trend as bears target the key support at 1,793. EUR/USD The EURUSD pair continued its bearish trend as concerns of natural gas prices rise. The pair fell to a low of 1.0382, which is close to its lowest level in almost 20 years. Its Bollinger Bands have widened while the Relative Strength Index (RSI) has moved slightly above the oversold level. The Williams %R has also moved to the oversold level. Therefore, the pair will likely keep falling as sellers target the next key support level at 1.0250. GBP/USD The GBPUSD pair declined to a multi-year low of 1.2185 as the US dollar continued its strength. The pair has moved below the 25-day moving average and the Stochastic Oscillator has moved to the neutral level. The pair will likely remain in the same range during the American session.  

What moves markets? A fundamental analyst like me will talk about economic fundamentals: inflation rates, growth rates, monetary policy, fiscal policy, unemployment, etc etc. But these are facts. The facts aren’t everything. It’s also important to understand how people interpret the facts. Is the glass half full or half empty? It’s the same glass, but people will interpret it differently depending on their attitude. That interpretation is everything in markets, which arise because people want to buy or to sell. The seminal event in my career as an analyst was in January 1980.  On January 3rd, the Paris Bourse suspended gold trading for the first time in its history because of an order imbalance – buyers only. The next day it had to suspend trading again because of an order imbalance – sellers only. It took 26 years for gold to regain those prices. It took five years for me to see another day like that. On Feb 26, 1985 the dollar staged its largest single-day advance against major foreign currencies in seven years, rising 4 pfennigs in one day to hit a 13 ½ year high of 3.4390 DEM. The pound hit a record low that morning of $1.03 and change before recovering to end at 1.0615.  The odd thing was, nobody could figure out just why the dollar was soaring, but most pundits quoted in the press agreed that it would continue to do so. The next day however then-Fed Chairman Paul Volcker started talking about more FX intervention and in 15 minutes the dollar was down about 8 pfennigs. Spreads were at one time 150 tics. Events like this taught me that in the final analysis, what makes markets move is not the Fed, not interest rates, not fiscal policy, but two basic human emotions: fear and greed. The crypto market, where economic fundamentals are secondary in people’s minds if present at all, is a perfect “fear and greed” market. Why do people buy cryptos? Most coins have a story behind them, a theory, an ideology, a mission. People may well believe in these ideas, but at the end of the day they’re buying for one reason: they believe the value of the coin is likely to go up. They are buying it as an investment, an asset. FOMO or Fear of Missing Out is the key phrase here as they see their friends making money and read about Bitcoin billionaires (a feeling I admit I felt too when Bitcoin went to $60k and I began playing around with the question of how much I’d be worth if I had bought $1,000 worth at 5¢ each. Answer: a lot more than I’m currently worth, that’s for sure.) On the other hand, when prices start to fall some people will be willing to HODL but many others will decide to get out while they still can. Then FOMO is forgotten. Instead we see a market phenomenon that goes by the German word Torschlusspanik: the fear of the closing of a door. This is the panic that fuels bank runs. That’s what we saw this week. The poster boy for this phenomenon is a coin called Luna. A month ago it was the 4th most popular cryptocurrency. Luna is the sister cryptocurrency of stablecoin TerraUSD, aka UST. TerraUSD is supposed to be pegged at $1, but for some reason it “broke the buck” and is now trading around $0.40. As a result, Luna plunged. It closed at $77.46 on Friday, $64.08 on Sunday, $32.00 on Monday, $17.52 on Tuesday and $1.07 on Wednesday. Thursday while looking for a graph of the price I saw a quote of $0.01491. Oops! Now it’s $0.01289. Down a further 14% in minutes. By comparison, on April 5th it hit a high of $119.18. (In case you think it can’t fall any further, Friday morning it was quoted at $0.00005348, down 99.6% from the rate when I was writing on Thursday. In other words, no matter how low it goes you can still lose 100% of your investment in it. Kind of like the financial version of Zeno’s paradox.) This is a far cry from just this past January, when ads for cryptocurrencies dominated the Super Bowl, the most expensive advertising platform on American TV. “This is a real sort of unveiling moment for the entire sector,” The Wall Street Journal’s reporter said. In what may go down as a masterpiece of unintended irony, he pointed out that the 2022 display of ads from this sector was a lot like “the dot-com Bowl of 2000,” when the Super Bowl ads were dominated by “a slew of internet-related brands, many of which went on to fail.” Hmm… The odd thing is, a major selling point of these coins was that they are a hedge against...

Energy The oil market continues to trade in a large intra-day range and is struggling to find direction during this period of uncertainty for both supply and demand.  Yesterday, the market took comfort in an easing of Covid cases in some parts of Shanghai. However, China still appears unwilling to drop its zero-covid policy, which will continue to be a risk for demand. There has been little progress in the EU’s proposed oil embargo against Russia. The European Commission and other member countries have failed to convince the Hungarian government to back the ban. Instead, the Hungarians have said that they would only support the ban if there is an exemption for Russian pipeline oil flows. If we were to see this, it would significantly water down the impact of the ban, given that the Druzhba pipeline flows amount to somewhere in the region of 1MMbbls/d, which is a significant portion of the roughly 2.3MMbbls/d of crude oil that the EU imported from Russia in 2021. Given the large volumes of Russian pipeline oil coming to the EU, it is hard to see an exemption on pipeline flows as an acceptable compromise. The longer these talks drag on, the more pressure there could be on EU member countries to impose a ban on a national level, rather than waiting for all EU members to finally come to an agreement. The EIA’s weekly oil report showed that US commercial crude oil inventories increased by 8.49MMbbls over the last week. However, SPR inventories declined by 6.99MMbbls, which means that total US crude oil inventories increased by a more modest 1.5MMbbls. Crude oil exports declined by 695Mbbls/d over the period, helping the build seen in inventories. However, the refined products market continues to tighten up. Despite refiners increasing operating rates over the week, gasoline inventories declined by 3.61MMbbls, which saw stocks falling below the 5-year range. Tighter gasoline stocks as we move into the driving season should be supportive of gasoline cracks. Distillate fuel oil inventories also declined, although fell by a more modest 913Mbbls. However, total US distillate stocks are at their lowest levels since 2005, whilst if we look to the US East Coast, inventories are at their lowest levels since at least 1990. The continued tightening in middle distillates and the risk around Russian gasoil exports suggest that middle distillate cracks could see some more strength.  Finally, OPEC and the IEA will release their monthly oil market reports today, which will include their latest outlook on the market. It will be interesting to see what supply revisions both agencies have made, if any, given the EU’s proposed ban on Russian oil. In addition, there is the potential for further demand downgrades, particularly from OPEC, given that they have made much more modest downward revisions up until now. Metals Industrial metals rebounded in yesterday’s Asian session, and this strength continued into London with most base metals closing in positive territory. The move higher was likely sparked by hopes that China would launch a large infrastructure stimulus package by issuing special bonds. However, officials have not confirmed this. There are also signs of Covid cases easing in some districts of Shanghai, as local authorities have been trying to control the virus from spreading at the community level. Zinc led the rebound in base metals, with the 3M price touching an intraday high of US$3707/t and closing $71 higher, as the galvanising metal is most exposed to infrastructure stimulus. Despite market sentiment deteriorating due to the near-term demand outlook, the refined market tightness has not yet eased. In addition, LME reportable stocks have continued to fall due to persistent tightness in the market. The Chinese onshore market received a boost after reports that the US President may cancel some tariffs on Chinese imports, including some stainless steel products. However, the total export volume related to the potential tariff removal is insignificant according to MySteel; therefore, the impact on exports would be limited. Read the original analysis: The Commodities feed: EU no closer to a Russian oil ban

On the daily chart, the SP500 index is still retreating from the historical peak of 4819.5, which was reached in January. As we can see, stock markets have had a challenging year so far in 2022, and this index has fallen by more than %35 so far. Another sign of a prevailing downtrend is the 50-day EMA crossing below the 200-day EMA early in May. Even though buyers stepped in on Friday to raise the price to 3980, as long as the price moves below the moving averages, making lower tops and lower bottoms, the outlook is bearish. For the bears, the immediate key support is seen at 3811.6, which lines up with the 38.2% Fibonacci level. In case the downtrend continues, and sellers manage to push the price down, then the decline will continue towards the next support level at 3672.8. If this level cannot provide sufficient support to the price, sellers will be prepared to target 3500.2, aligning with the 50% correction of the prior uptrend. Alternatively, a bullish correction might take the price to the 3996.7 and 4062.1 resistance levels. If each of these price levels can successfully halt the rally, sellers will consider that an opportunity to reenter the market Short-term momentum oscillators indicate a bearish bias. The RSI fluctuates near the 30 range in the selling area. The momentum is also below the 100 baseline, which is an indication of selling pressure. Similarly, MACD bars in the negative region are advancing below the signal line.

Dow Jones Bears are taking a breather on Friday, as traders collects profits after a sharp fall this week (the index was down over 3% during Mon/Thu period. Stock markets were slashed by worries of high inflation and aggressive monetary policy tightening, as Fed signaled a series of rate hikes in coming months to contain the raging inflation. Today’s bounce from new multi-month low (the lowest since Feb 2021) eases immediate downside pressure, but the Dow is still on track for strong weekly loss ( the sixth consecutive weekly close in red). Corrective action was signaled by Thursday’s long-tailed daily candle and oversold conditions, with fresh bulls trading above initial resistance at 31824 (Fibo 23.6% of 34017/31146 bear-leg), but needs more work at the upside and violation of pivotal Fibo barrier at 32243 (38.2%) to generate initial reversal signal. Turbulent geopolitical and economic conditions are likely to keep traders away from risky assets, suggesting that current correction is likely to be limited and offer better selling opportunities, with the base of thick weekly cloud (32781) expected to cap and keep larger bears in play. Res: 31958; 32152; 32243; 32501. Sup: 31678; 31561; 31456; 31338.

Overview: Global equities are bleeding lower. Several large markets in the Asia Pacific region, including Hong Kong, Taiwan, and India are off more than 2%. Japan and Australian bourses fell by more than 1.5%. Europe's Stoxx 600 is off more than 2% and giving back the gains recorded in the past two sessions plus some. US futures are extending yesterday's loses. The sharp sell-off of equities has given the sovereign bond market a strong bid. The 10-year US Treasury yield that had approached 3.20% on Monday has tumbled to 2.81% today. The 2-year yield had approached 2.75% yesterday after the disappointing CPI report. It is now around 2.57%. European 10-year benchmark yields are 10-14 bp lower. The dollar is flying, except against the Japanese yen. The Antipodeans and Norwegian krone are getting tagged more than 1% today. The euro and sterling have been sold to new lows. Emerging market currencies are a sea of red too. Hungary, which kept its one-week deposit unchanged, has seen the biggest hit, off almost 1.5% today, while the Chinese yuan is off by slightly more than 1%, which is a large move for it. The Hong Kong Monetary Authority intervened to defend its peg for the first time in three years. Gold is heavy, after recovering from a three-month low yesterday near $1832. It is hovering a little below $1850 near midday in Europe. June WTI is trading with a lower bias ahead of the OPEC and IEA reports. US natgas is off almost 3% after gaining more than 8.5% over the past two sessions. Disruptions of Russian gas to Ukraine has seen Europe's benchmark jump by more than 13% today. Iron ore, which snapped a three-day slide yesterday with a 4.2% jump is off nearly 5% today. Similarly, June copper rose for the first time in five sessions yesterday. However, today's 3.6% plunge more than offset yesterday's 1.3% gain. July wheat prices are little changed ahead of the US World Agriculture Supply and Demand Estimate report. Asia Pacific China's fourth largest property developer, Sunac, has defaulted on a dollar bond, according to reports, adding to the angst emanating from Beijing. New Covid cases in Shanghai means the lockdown will continue. The restrictions are estimated to cover around a third of the country's GDP. A PBOC indicated that it is guiding rates lower. The benchmark 1-year medium-term lending rate may be set on Monday. It stands at 2.85%. The market was disappointed that there was no reduction last month and does not want to be bit by the same dog twice and most look for it to be unchanged. Next week Chinese officials will meet with tech companies and there is hope that the crackdown will end. Japan is suffering from a terms-of-trade shock as the prices of imports have soared compared with exports. However, the broader measure, the current account surplus swelled in March to JPY2.55 trillion from JPY1.65 trillion and well above expectations (median forecast in Bloomberg's survey was JPY1.75 trillion. The key, as we have argued, is the primary income, which is the return on past investment, such as interest, dividends, re-invested earnings, royalties, and licensing fees. The weakness of the yen boosts the value of these foreign earnings. On balance-of-payment terms, Japan recorded a trade deficit of JPY166 bln, a little smaller than in February but larger than expected. Japanese figures which do not always jive with the US Treasury data, showed Japanese investors were sellers of JPY2.9 trillion of US government bonds in March, the sixth consecutive month this time series has recorded sales. Canadian, British, German, and Italian bonds were also sold in March. Japanese investors looked kinder toward Australian, French, and Dutch bonds. The continued drop in US Treasury yields has seen the dollar slump against the Japanese yen. The greenback has been sold to new lows for the month near JPY128.40. It has broken the 20-day moving average (~JPY129) for the first time since early March. A break of the JPY128.30 area could signal a move toward JPY127.00. The Australian dollar has broken down and is trading at new lows since mid-2020, pushing below $0.6900. After rising to around $0.7055 yesterday, the Aussie reversed sharply lower and settled near $0.6940. The next significant chart area is closer to $0.6760, which corresponds to the (50%) retracement of the gains from March 2020 low around $0.5500. The greenback rose to almost CNY6.79 as it broke higher out of the consolidative phase seen earlier this week. It is the strongest level of the US dollar since last October. We suggest the next target is around CNY6.82. For the eighth consecutive session, the PBOC set the dollar's reference rate lower than expected (Bloomberg survey). The fix was at CNY6.7292, while the market anticipated CNY6.7341. Given that the greenback is allowed...