Daily Wrap Up 04 July 2022

4 Jul 2022 03:54 PM

Trade data weighs on the DAX

European equity markets are mostly showing modest gains as bargain hunters entered the fold. Last week, stocks came under pressure due to increasing concerns that a recession is on its way. Germany’s DAX dropped to a three-month low last Thursday. For much of the session the DAX was rebounding but it has since dropped into the red. Earlier on, it was confirmed that Germany ran trade deficit in May, the first monthly deficit since 1991. Germany is a major exporter, which is why it is typically runs a trade surplus, but the surge in import prices were behind the trade deficit. Also announced was the eurozone Sentix Investor Confidence report, it dropped to a 26-month low of -26.4. Traders have largely shrugged off the downbeat news, but these issues are not going away. The DAX is 0.3% offside, while the pharmaceutical, banking, mining sectors are propping up the London market, the FTSE 100 is up 1.1%.

The New York Stock Exchange remains closed today as the US celebrates its Independence Day holiday. Volatility in the markets remains low as traders and investors in this part of the world are tempted to sit on the fence.

The US dollar index is in the red because of the pullback in bond yields. The US 10-year yield is now 2.88%, which is a big fall when you consider it was above 3.20% last week. Later this month the Federal Reserve will reveal its interest rate decision and there is talk of a 0.5% hike. Even though the greenback is lower, it is only 1% shy of the 20-year high that was registered last week, so it remains in its wider uptrend. GBP/USD, EUR/USD and AUD/USD are all higher on account of the weak dollar. Gold and silver are reaping the benefits of the fall in the US dollar. It is worth noting that silver fell to a two-year low a few days ago, so it is possible we are now seeing a relief rally in the metal.

It seems to be the case of buy the rumour and sell the fact with the Swiss franc as the currency has performed well recently, but it is now largely lower following the news that Swiss CPI jumped from 2.9% to 3.2%, topping the 3.1% forecast. Rising inflation is a common theme in several countries and that ties into the view the global economy could move down a gear.

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