Stocks lower on rate hike concerns

BY Janne Muta

|June 1, 2023

Stocks traded lower yesterday as concerns about the economy and potential Fed rate hikes weighed on investor sentiment. Nasdaq, Dow, FTSE and DAX all traded lower. The increase in job openings (10.10M, 9.41M expected, 9.75M prior) in April sparked worries that the Fed might continue hiking rates. Some optimism followed after Fed Governor Philip Jefferson's statement suggesting a pause in rate hikes but it wasn’t enough to turn the tide. The House passed a bill suspending the federal government's debt ceiling in return for spending cuts. The bill received bipartisan support and is expected to quickly pass through the Senate.

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DJ (-0.48%) lost some ground while Nasdaq declined by 0.82% FTSE 100 dropped by 1.01% and DAX sold off by 1.3%. USOIL fell 2.8%, while gold inched higher by 0.16%. The JPY strengthened by 0.32%, while the Euro weakened by 0.42%.

In today's trading, the focus will be on key economic indicators and central bank speeches. Keep an eye on the EURUSD with the release of EU CPI data. ECB President Lagarde's speech will be also followed closely as traders hope it will provide insights into the central bank's future rate policy.

For the USD, pay attention to the ADP Non-Farm Employment Change and Unemployment Claims figures, which could guide us on what tomorrow’s NFP release is like. Additionally, the ISM Manufacturing PMI and Manufacturing Prices data will provide insights into the US manufacturing sector. Lastly, keep an ear out for any comments from FOMC Member Harker, as they may impact the market expectations on Fed rate hikes.

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Silver is bullish above 22.90. Above the level, the market is likely to trade to 24.00 and then possibly to 24.20. Below 22.90, silver probably tests the 22.67 low again.

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EURUSD is bearish below 1.0703. Above the level, we might see a move to 1.0750 first and then to 1.0830 on extension.

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USDCAD could be turning bearish. The market has created a double top in the 8h timeframe and if the neckline at 1.3567 is broken decisively, USDCAD might trade down to 1.3520. Above 1.3567, look for a move to 1.3620.

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CADJPY is bullish above 102.09. Above the level, look for a move to 104.60. Below 102.09, the market might trade down to 101.60.

The Next Main Risk Events

  • EUR CPI Flash Estimate
  • EUR Core CPI Flash Estimate
  • EUR ECB President Lagarde Speaks
  • USD ADP Non-Farm Employment Change
  • USD Unemployment Claims
  • USD ISM Manufacturing PMI
  • USD ISM Manufacturing Prices
  • USD FOMC Member Harker Speaks
  • USD Average Hourly Earnings
  • USD Non-Farm Employment Change
  • USD Unemployment Rate

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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