The price of global equities declined this morning as global futures markets opened. The price volatility this morning resulted from political events over the weekend in Russia and economic news from last week. The Wagner group's “insurrection” over the weekend only lasted 24 hours and did not do real physical damage. However, the move triggered insecurity in Russia and a global low-risk appetite. In addition to this, the development over the weekend created volatility amongst commodities, including Natural Gas, Wheat, and other soft commodities. For example, due to supply chain fears, Natural Gas rose 2.40% this morning.
Over the past 6 hours, the NASDAQ has declined by 0.54% due to the lower risk appetite. Investors are monitoring developments from over the weekend and if the insurrection will grow into riskier instability in the future. In addition, investors are also pricing into the market the higher interest rates, which have been recently indicated. Lastly, the recession risks continue to increase as the monetary policy becomes more restrictive and the Purchasing Managers’ Index reads significantly lower than expectations. European Indices are also declining this morning. The price of the CAC is down 0.29%, the FTSE100 by 0.54%, and the DAX is 0.65% lower.
XAU/USD - Russian Instability Triggers Volatility
Gold, a safe-haven asset known to witness higher demand during uncertainty, opened higher this morning. The bullish price movement, including the price gap, measures 0.42%. However, the price remains below previous lows and highs. Therefore, the asset continues to follow the downward-facing regression channel analysed during last week’s technical analysis video and market analysis. However, if uncertainty increases and demand for the safe-haven asset grows, the regression channel will end if the price rises above $1,949.
Analysts advise that uncertainty and a stock market correction can trigger higher demand for less risky assets such as Gold. As a result, Gold may increase back to previous levels above $2,000. However, higher interest rates simultaneously dampen this possibility as higher interest rates can more easily be used to hedge against risk and inflation. Bullish traders will be looking for political instability, no further interest rate hikes after Friday’s poor PMI data, and a weaker Dollar and stock market.
The price of the US Dollar declines to 102.77, measuring a 0.13% decline and takes the index back below 103.00. However, the current level trades at a previous resistance level which has flipped onto a support. Therefore, technical analysts will be monitoring if the Dollar will gain momentum at this point. If the price of the Dollar continues to decline, the price of Gold potential may gain bullish momentum throughout the day. The primary resistance levels for the bullish price movement are $1,937 and $1,970.
Dow Jones Down on Recession Fears
The Dow Jones has significantly declined during this morning’s futures market and is close to a 16-day low. The downward price movement measures 0.47% and continues to move within a downward trend pattern. The price is currently trading below the Volume-weighted average price, indicating that sellers have control of the market, but that the price may retrace slightly higher. The current order flow is also indicating a downward price movement. However, traders should monitor pending orders via the Depth of Market at the $33.620 level and below.
The price of equities, in general, has been pressured by poor economic data from the US, UK and Europe. The US Manufacturing PMI was its lowest since December 2022, while European data dropped to its lowest since 2020. In addition to this, the Dow Jones, which is heavily associated with the banking sector, was put under a lot of pressure from hawkish central bank comments. The Federal Reserve has advised the central bank may increase interest rates by a further 0.50% by the end of the year. This can pressure consumer demand and investor sentiment towards the stock market. Investor sentiment has also been damaged by volatility amongst commodities, which previously caused inflation.
The Dow Jones worst-performing stocks in the latest session were Cisco Systems, which declined by 1.55%, Walgreens Boots and Goldman Sachs. Only four of the 30 stocks within the index ended the day higher than the market open. The stock which saw the highest increase was Intel, which rose by 0.89%. However, the index is also partially supported by institutions increasing their “target price” for certain stocks. For example, Barclay’s recently increased their target price for Microsoft from $250 to $375.
Summary:
- Political events over the weekend in Russia and economic news from last week triggered volatility and low investor sentiment.
- Global stock markets decline due to recession risk and volatility amongst commodities.
- Over the past 6 hours, the NASDAQ has declined by 0.54% and the Dow Jones by 0.51%.
- European Indices are also declining this morning. The price of the CAC is down 0.29%, the FTSE100 by 0.54%, and the DAX is 0.65% lower.
- The weakening US Dollar and recession fears support Gold.
