- 06:30 – Japan – Industrial production (monthly – July). Data: 0.8%. Forecast: 1%. Previous: 1%.
- 08:00 – UK – Annual CPI (August). Data: 9.9%. Forecast: 10.2%. Previous: 10.1%.
- 08:00 – UK – Annual Entry PPI (August). Data: 20.5%. Forecast: 22.4%. Previous: 22.6%.
- 08:00 – United Kingdom – Annual output PPI (August). Data: 16.1%. Forecast: 17.4%. Previous: 17.1%.
- 09:30 – Euro Zone – Appearance of Enria from the ECB.
- 10:00 a.m. – United States – IEA Monthly Report.
- 11:00 a.m. – Euro Zone – Monthly industrial production (July). Forecast: 0.4%. Previous: 2.4%.
- 1:00 p.m. – Euro Zone – Appearance of Lane, from the ECB.
- 2:00 p.m. – Euro Zone – Appearance of McCaul, from the ECB.
- 2:30 p.m. – United States – Monthly PPI (August). Forecast: -0.1%. Previous: -0.5%.
- 2:30 p.m. – United States – Monthly Core PPI (August). Forecast: 0.3%. Previous: 0.2%.
- 4:30 p.m. – United States – IEA Crude Oil Inventories. Forecast: 0.833M. Previous: 8,844M.
- 4:30 p.m. – United States – IEA Cushing’s Weekly Crude Inventories. Previous: -0.501M.
Know all the macro information through the economic calendar.
European stock markets open lower, following negative signals from Asia and above all, following yesterday’s big sell-off on Wall Streetafter inflation data came in higher than expected, dismantling the theory that price inflation had already peaked.
This caught markets off guard, with analysts expecting prices to at least stabilize and not rise further.
Markets are still pricing in a 75 basis point rate hike by the Fed next week, but fed funds futures now give a 32% chance the Fed will raise rates by 1% or otherwise, by 100 basis points basic next week.
The consumer price index report for August showed headline inflation rising 0.1% m/m despite forecasts of a contraction of 0.1%, while the annual rate moderated less than expected to 8.3%, while the forecast was 8.1%.
The euro fell back below the dollar parity, retreating sharply from the rebound accumulated since last weekonce the ECB raised rates by 75 basis points, in an unprecedented hike and told the agency that borrowing costs will continue to rise due to inflation remaining at historically high levels .
Bundesbank President Joachim Nagel backed the ECB’s decision, saying over the weekend that if inflation did not slow, clearer steps needed to be taken.
In addition, the central bank lowered its GDP growth estimates for the coming years, but refrained from suggesting that a contraction could take place.
European Commission President Ursula von der Leyen will present a package of measures today to help families and businesses tackle rising energy costs.
Unlike the US inflation we saw yesterday, today in the UK we saw the inflation rate unexpectedly slow to 9.9% in August 2022 from 10.1% in July, and vs. market forecast of 10.2%.
The largest contributions came from housing and home services (mainly electricity, gas and other fuels and owner-occupied housing costs), transportation (mainly fuels), and food and non-alcoholic beverages.
In the US market today we see futures stabilizing after higher than expected inflation figures triggered a sell off in the marketinvestors worried about the prospect of an even more aggressive response from the Federal Reserve.
All S&P sectors ended in the red yesterday, with Communication Services, Technology and Consumer Discretionary falling more than 5%.
However, despite the strong crash, there are internal market signals that contradict each other, on the one hand, the amplitude (NYSE DNA has not deteriorated and on the other hand, the dark pools show readings very high indicating strong buys, indicating accumulation in the market), which contrasts with the reading of the majority of sales in Market on Close Orders.
All this indicates that we must be extra careful before making aggressive investment decisions, let’s not forget that Friday we have the quadruple witching hour (monthly and quarterly maturities of derivatives).
Yesterday’s bearish engulfing candle on the S&P 500 also indicates that we may see lower lows than yesterday in later sessions.
In Asian stocks, the Nikkei 225 index fell 2.78%, reversing the gains of the past three sessions and leading to steep losses overnight on Wall Street.
Tech stocks led the overall market decline.
For its part, the Japanese currency, the yen, depreciated yesterday to 145 per dollar, hovering around its lowest levels since August 1998, weighed down by the strong US inflation announced.
The sharp drop in the yen prompted more verbal interventions from the authorities, with Japan’s top foreign exchange diplomat Masoto Kanda saying the government “will respond to currency movements without ruling out any options”, giving some look at Japanese currency. .
The Japanese currency has lost around 25% of its value against the dollar so far this year due to growing policy divergence, as the Bank of Japan vowed to keep interest rates ultra-low to support a fragile economy at a time when the US central bank raised rates aggressively to fight inflation.
In China, the Shanghai Composite ended with a loss of 0.8%, while the Shenzhen Composite fell 1.26%, erasing gains from the start of the week, following the decline in global equities.
Continental equities continued to struggle on global macro headwinds and domestic economic concerns, largely driven by the strict zero covid policy.
The measures also came even after China’s latest inflation data supported an easing bias, while authorities have repeatedly said they will implement more policies to stabilize its Covid-hit economy. .
In the commodities market, WTI crude oil futures fell below $86 a barrel, pulling back further from the one-week high reached in the last session.
After the inflation data and bets on more aggressive rate hikes from the Fed, the dollar is rebounding and oil is under pressure, along with other risky assets, as this could further reduce demand general.
Investors also continued to be concerned about the current Covid-19 restrictions on major crude importer China. On the supply side, industry data released yesterday showed US crude inventories rose by some 6 million barrels last week as investors await official EIA data later this week. .
How to take advantage of the opportunities of this market? Example of operation.
To illustrate how to trade in the example we will use the Ibex 35. At IG we could trade this market with CFDs, Barrier, Vanilla Options and Turbo24. We will use the latter for the example, since it is a product quoted on a 24-hour market, which allows us to adapt the leverage effect of our operations and to be hedged against market gaps. In addition, Turbo24s have no commissions.
In this case, the minimum contract size would be the purchase of a long Turbo24 or a short turbo, which equals 0.01 euro per point. For our example, which should in no way be considered a recommendation to buy or sell, since that is not its objective, we will select the amount equivalent to 1 euro per point, or one hundred Turbo24.
If the second scenario is confirmed and it is decided to enter bearish, we would buy a hundred short Turbo24s. Imagine that the Ibex 35 is trading, for example, at 7972 points. We could set the exit level or knock-out (guaranteed stop), for example at 120 points above the entry price (7972 + 120 = 7972 points). If at that time the price of the turbo, let’s imagine, is 1.2 euros, the guarantee (remuneration) requested will be 120 euros (100 turbos x 1.20 euros for each Turbo24). The leverage of this operation would be 66.43 times (7972 / €120 = 66.43).
Additionally, it has the advantage that if there are increases in volatility when the market is closed that trigger our knockout, the trade is not closed. This implies that if when the spot market opens it does so in our direction, we will continue to be inside and we may continue to gain benefits. If, on the other hand, when the market opens, it does so at a price equal to or above our knock-out price, we are assured of the maximum loss at that originally deposited amount, so we are hedged against market gaps.
In the event that the first scenario is confirmed and it is decided to enter bullish, we would buy one hundred long Turbo24 at an index price of 8086 points. We could set the knockout level, for example, at 120 points below the entry price (8086 – 120 = 7966 points). If at that time the price of the turbo, let’s imagine, is 1.2 euros, the guarantee (remuneration) requested will be 120 euros (100 turbos x 1.20 euros for each Turbo24). The leverage of this trade would be 67.38 times (8086 / €120 = 67.38), retaining all the advantages explained above and protection against the negative balance in the event of bearish market deviations.
Download our 24-hour trading guide now and take advantage of all the opportunities.
Get analysis of key levels in pre-opening thanks to the premium service.
Access the full annual course.