19 July 2022

2 mins

Markets look to data ahead

There were few major macroeconomic developments to start the trading week, with markets instead looking ahead to a heavy schedule of central bank meetings later this week.
The UAE and France have signed a comprehensive strategic energy partnership to expand energy security, affordability and decarbonization, according to media reports. The signing comes in the wake of UAE president Mohamed bin Zayed al Nahyan visiting France. The agreement will also allow for the establishment of a joint energy investment fund while both TotalEnergies, a French energy major, and ADNOC will work together to aid energy transition investments.

Today’s Economic Data and Events

Fixed Income

US Treasuries closed weaker to start the trading week with yields at the front end of the curve up 5bps to 3.1744% while the 10yr UST yield added 7bps to 2.9855%. There was little in the way of Fed commentary to adjust market expectations for what the FOMC will do later this month with a 75bps hikes more than fully priced in.
European bond markets closed weaker across the board with 10yr bund yields up 8bps at 1.207% while gilt yields rose another 7bps to 2.153%. Gazprom, Russia’s major natural gas exporting company, declared force majeure on the export of gas to some partners in Europe, effectively shutting off their supplies just as Europe is going through a threatening heat wave.

The dollar reversed course overnight, falling against all major peer currencies. The broad DXY index fell by 0.64%, extending losses from the end of last week. EURUSD added 0.6% for a second day running, settling at 1.0143 while GBPUSD jumped by more than 0.8% to 1.1953. USDJPY, looking ahead to the BoJ later this week, managed to pull back by 0.3% to settle at 138.14.
In commodity currencies CAD led the way with a gain of 0.4% against the US dollar with USDCAD closing back below 1.30. AUDUSD added almost 0.3% to 0.6812 while NZDUSD fell by 0.18% to 0.6154 amid high inflation in the country.

Equities

US equity markets turned lower overnight as company results remain disappointing, particularly news from Apple that intends to slowdown its pace of hiring. The Dow Jones index fell 0.7% while the S&P gave up more than 0.8% while the NASDAQ fell by 0.8%. In Europe, markets were generally stronger with the FTSE up 0.9% overnight while the broad EuroStoxx 50 added 1%.
Asian equity markets are mixed in trade this morning with a gain of nearly 0.9% in the Nikkei offset by a decline of 0.5% in the Hang Seng.
Regional equity markets had a positive bias overnight with the DFM closing up 0.3% while the ADX settled higher by 0.1%. In Saudi Arabia the Tadawul was up strongly, adding more than 2%.

Commodities

Oil prices rallied sharply to start the week as markets digest the impact, or lack of one, from US president Joe Biden’s visit to the Middle East. Brent futures settled up 5% to USD 106.27/b while WTI added 5% to USD 102.60/b. Oil prices will receive further support from an interruption to flows along the Keystone pipeline that links Canada with the US, caused by power outages at a pumping station on the US section.

Edward Bell