Daily Digest:
w/c 24th June - a relatively light data week, with spotlight on US GDP and Durable Goods Wednesday, then the Fed’s preferred inflation measure, the MoM and YoY PCE data on Friday

Chinese woes and higher bond yields rattle markets

Intermediate

Macroeconomic/ geopolitical developments

  • The Chinese economy is facing the threat of contagion. Defaults on bonds and the need for debt restructuring are increasingly sweeping through the shadow banking and associated real estate sector. Unless this can be successfully managed and contained, there is a risk of contagion to the rest of the Chinese economy. Traders are increasingly concerned over the negative implications for the global economy and higher risk assets are suffering as a result.
Chinese Stock Market Down
  • Global bond yields have pushed strongly higher. The rout of selling pressure on bonds has come amid a perception that central banks will need to keep rates higher for longer. The moves have been led by idiosyncracies of the US Treasury yields which are rising from huge bond supply but also the solid performance of the US economy.
  • As has been the case in recent weeks, the USD has been a go-to asset of choice in this risk-off environment. The stronger USD has implications for not only forex but it is also weighing on commodities (especially metals prices) and equities too.

Global financial market developments

  • US Index futures have gone into sharp reverse. The bull trends that lasted around five months have turned into corrective moves, with a series of support levels being broken. The outlook has changed and rallies now look to be a chance to sell.
  • The e-mini S&P 500 futures have broken below 4368 opening 4262 as the next support. The e-mini NASDAQ 100 futures have breached 14853 to open 14256 as the next support.
  • The sharp rise in the US 10-year yield is once more “bear-steepening” the yield curve. The 10-year yield is around 4.20% with the 2-year yield around 4.90%.
  • The rally in the US Dollar Index has reached a key juncture. A decisive break above resistance around 103.60 opens upside towards the May high of 104.70.
  • Gold futures continue to be weighed down by the stronger USD and have fallen to breach support at $1892.50. A continued move lower would open the next key support at $1808.
  • Oil futures have failed to hold an initial breach of the key resistance at $83.53 to leave a key high at $84.89. A move below $78.69 would complete a small top and imply c. $73/$74.

Key this week

  • Central Bank Watch: No formal central bank announcements, but the focus will be on the Jackson Hole Economic Symposium. Will Fed Chair Powell reveal the FOMC’s next step?
Jackson Hole
  • Macroeconomic data: A light calendar this week, with the flash PMIs being of most interest for broad markets.
DateKey Macroeconomic Events
08/21/2023n/a
08/22/2023Existing Home Sales, Richmond Fed Manufacturing
08/23/2023Flash PMIs from Australia, Japan, Eurozone, UK and the US; Eurozone Consumer Confidence; US New Home Sales
08/24/2023ECB minutes; US Weekly Jobless Claims, Durable Goods Orders; Jackson Hole Economic Symposium (Day 1)
08/25/2023German Ifo Business Climate; Michigan Sentiment (revised); Jackson Hole Economic Symposium (Day 2)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

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