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Asian stocks fell and Treasuries rose after Federal Reserve minutes showed officials face a delicate balancing act to quell inflation while averting recession and as investors weighed a dim Chinese economic outlook. Asian shares tracked lower on Thursday, in step with Wall Street’s losses, as even the prospect of a less aggressive Federal Reserve has still set the U.S. central bank on a path for interest rates to stay higher for longer.
Losses in Japan, China and a Hong Kong tech index sapped on an Asian equity gauge. US contracts wavered after Wall Street shares declined for the first time in four days, including a more than 1% drop in the Nasdaq 100 index.
The dollar rose overnight after the Fed’s July minutes pointed to a steady course of rate hikes ahead.
The Federal Reserve’s minutes for its July meeting showed it was contemplating paring back the pace of future rate hikes in line with a slowdown in inflation but saw “little evidence” yet that pressures were easing.
Investors interpreted the minutes as a sign the U.S. tightening cycle could be less aggressive than forecast but showed Fed policymakers committed to raising rates till prices come under control.
On Wednesday, the Dow Jones Industrial Average fell 0.5% to 33,980.32, the S&P 500 lost 0.72% to 4,274.04 and the Nasdaq Composite dropped 1.25% to 12,938.12.
The dollar rose 0.04% against the yen to 135.06. It is still some distance from its high this year of 139.39 on July 14.
U.S. crude dipped 0.64% to $87.53 a barrel. Brent crude was down 0.52% to $93.16 per barrel.
Gold was slightly higher. Spot gold was traded at $1763.4532 per ounce.
FOMC
Federal Reserve officials agreed last month on the need to eventually dial back the pace of interest-rate hikes but also wanted to gauge how their monetary tightening was working toward curbing US inflation. While all Federal Open Market Committee members backed the 75-basis point hike, many saw a risk to over-tightening despite price increases being “unacceptably high.” Even though Fed Chair Jerome Powell suggested the central bank could transition to smaller rate hikes going forward, the door remains open for another large increase at the next meeting in September, depending on economic data to be published in the interim.
FTSE100 live outlook prediction analysis for 18th August 2022
Today I am expecting a bit of a rise and dip to play out, as the bulls defended the 7490 level yesterday. We are also testing the bottom of the 10 day Raff channel at the 7490 area and a rise to test to the new 2h resistance level at 7543 would make sense to start with. If the bulls can manage it!
If we do get to that level then we may well se the bears appear here, for a run down towards the 7460 support area. Below that then they will be aiming for 7440 where we have S2 with 7420 below that for a test of the 25ema on the daily. That would be the first test of that EMA since it went bullish on the 25th July, so could well be quite a key area for the bulls to defend. Normally that would be a decent swing trade entry indicator so worth fading in a long here and if it starts to bounce, then adding in.
For the bulls, en route to 7540 does have some resistance at 7522 where we have the daily pivot, and we could well see a stutter here first thing. The 30m chart is quite bearish to start with as well, so the bulls have their work cut out – we have the red coral and the 200ema all between 7510 and 7522. That said, the bulls will be keen to defend the 7500 round number. So, a bit of no mans land at the moment!
The Raff channels continue to head up though we are now nearly at the bottom of them both – 7490 and 7475 support from them for today.
Focus is still firmly on inflation and the associated interest rate rises form the central banks. Cost of living increases continue apace as the news flow remains negative, with house prices dropping off, wages reducing etc etc. It really is a perfect storm at the moment and the banks will be keen to avoid stagflation which can persist for quite a while. We mooted that this would be a possibility some years ago after what happened in Japan (the lost decade), and it does look like its coming to pass in the West. Those who forget the past are doomed to repeat it!
S&P500
Similar picture here really with a rise towards the pivot at 4277 and then a drop off down to test the support at 4228. The 2h chart is bearish with 4315 resistance above the pivot, and the bulls failure to hold onto 4290 means the bears have a shot at driving it down, for a bit anyway! 4245 is first key support with the key fib and S1 here. 4235 is the bottom of the 10d Raff channel along with 4217 for the 20d – with all three markets testing the bottom of the Raff channels potentially today its really up to the bulls what happens next – fight back or give up!
Good luck today.
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