Stock Futures
US stock futures and European markets are trading lower as investors have picked up the momentum where they left off last week. This week is all about the US tech giants, which will be reporting and setting the tone for trading. There is no doubt that the earnings from the US banks have been somewhat better than expected (if you look at the overall picture). This kept the trading sentiment positive among traders, but what matters now is how well the US tech giants will perform.
If we look at the Nasdaq index, the Fed’s narrative has had a significant influence on the index’s performance so far this month. Given the fact that inflation is incredibly stubborn, it is highly likely that the Fed will continue to use its firepower by raising interest rates to bring inflation lower. The current yield on the US Treasury is a compelling argument in favour of this. It is important to highlight that the Nasdaq is highly sensitive to the Fed’s monetary policy. Previously, we witnessed the index fall on the back of higher interest rates.
The chances are that the Fed is going to increase the interest rate at least two more times by 25 basis points before it can ease off. Looking at the positioning table for fund managers, it becomes clear that they expect the markets to fall further, and the main reason that comes to mind is that the Fed will increase rates further, which will cause more pain for market players.
In terms of economic data, there isn’t much worth talking about what is on the docket; however, the US consumer confidence data due tomorrow and the US GDP reading on Thursday are going to bring higher volatility to the market. Bad news may not be perceived as good news, as the Fed will still have no other option but to hike rates due to sticky inflation. However, if the data completely falls off the cliff, we could see different odds of the Fed hiking rates further.
Gold
In the commodity market, the precious metal has started to lose its mojo, and the main reason behind it is the strength in the dollar index. This week’s US GDP number could bring some buyers back into the market as traders would consider hedge their bets if the data shows more than expected weakness.
The $2000 price level continues to remain an important price point for traders and investors. This is because when the price trades above this level, it raises hopes for a new record high. However, when the price trades below the price point, traders believe that the precious metal could experience a significant correction.
Bitcoin
The crypto king had another terrible weekend as the price slipped further away from the $30K price level. The momentum that was there a few weeks ago is no longer there, and traders are confused about why the price has stalled at the 30K price level, which isn’t even a meaningful resistance. Most believe that the current sell-off in the price is due to the Fed adopting a more hawkish monetary policy stance, which has taken the wind out of the crypto king.
The main price point that everyone will be paying close attention to will be the 25K support level, and any lower than that will bring more disappointment.
