News are mixed, but the US investors prefer making the most of it. The S&P500 closed Wednesday’s session 0.85% higher; that was the biggest jump since August, meaning that the 50-dma magic operated and gave another good support to the equity bulls.
Nasdaq and Dow Jones gained as well, despite a morose European session, where EuroStoxx lost more than 1%.
The biggest winners were the energy stocks, as the US energy sector jumped more than 3% yesterday on news that the US crude inventories fell 6.4 million last week. The expectation was some 3.5-million-barrel decline. As a result, US crude traded past $73pb, and Exxon (NYSE:XOM) broke above its horizontal triangle to the upside and closed the session more than 3% higher. Chevron (NYSE:CVX) on the other hand gained 2%. Yet, the 50-dma just slipped below the 200-dma, forming a death cross formation on the daily chart, which could limit the Chevron gains from a technical perspective. And if that’s not enough, fundamental news, apart from the energy prices, are not brilliant for Chevron. The company CEO threw a jaw dropping statement, saying that he would rather pay dividends than invest in wind and solar. My only reaction to that is: investors should rather invest in more smartly managed energy companies to lock in longer run profits as unfortunately for Chevron, the green energy is the future. Or there might be no future.
Else, Chinese stocks were badly battered yesterday, yet again! This time, it was the Chinese casino stocks turn to take the hit as government said it would change casino regulations to tighten restrictions on operators, including appointing government representatives to “supervise” companies in the world’s biggest gaming hub. So begins a 45-day public consultation period for Chinese casinos in Macau, and the consequences could be dramatic as important decisions will be taken. The news, and the worries wiped out $18 billion from the Chinese casino shares.
Alibaba (NYSE:BABA) shed another 1.43%, as it has also been hit by news that directly targeted the Ant Group's (HK:6688) Alipay earlier this week, when government said they would split Alipay’s lending business and share the user data with state backed partners. And needless to say that investors hated the idea of sharing the data more than they hated the idea of splitting Alipay’s business.
Now let’s have a look at some more macro news beyond the US. Inflation in Britain and Canada accelerated as well, according to data released yesterday. The British inflation came in above the 3% mark, fuelling the expectations that the BoE would be tempted to tighten its own monetary policy sooner rather than later. That idea should keep the pound on track for further gains against the USD toward the 1.40 level. The FTSE will likely continue feeling the pinch of a stronger pound and break the 7000p support despite firming oil and energy prices, because what we observe right now is that the reflation trade isn’t strong enough to boost reflation friendly energy and banking stocks, as even the tighter central bank expectations have no implication on future rate expectations, which remain subdued, regardless of the central banks’ QE taper plans.
Elsewhere, the data is mixed. The Japanese exports slowed more than expected in August, the GDP growth in New Zealand beat expectations with a 2.8% print in the latest quarter versus 1.1% expected by analysts, and the jobless rate in Australia fell from 5% to 4.5%. But that number could hide a more serious headache, as people are not necessarily ready to take any job. High job vacancies seem to be the new post-pandemic norm for the developed economies.
Due today, the US retail sales data could reveal a 0.8% monthly decline in August. But soft data would hardly dampen the mood, after Tuesday’s inflation eased worries of a too tight Federal Reserve (Fed) stance. On the contrary, there is a greater chance that we see the equity bulls benefit from a rebound following the latest S&P500’s latest dip to the 50-dma.
Well, you may have noticed that Gold doesn’t necessarily benefit these subdued US yields. The price of an ounce remains below the $1800 mark and should see limited upside appetite as long as the US equity markets remain on track for further gains.