*Russia halves natural gas deliveries to Europe through key pipeline
*Walmart issues profit warning as soaring inflation hits customers
*Oil rallies as tight supplies counter expectations of a slowdown
*Asian stocks mostly firmer ahead of probable US rate hike
US equities were mixed to kick off a busy week of earnings and the FOMC rate decision. The broad S&P500 rose by 0.13% with the tech sector lower but banks 1% higher. The tech-focused Nasdaq fell 0.55%. Asian markets have pared losses with the Hang Seng leading gains. Investor sentiment improved on China’s reported plans to tackle the real estate debt crisis. European futures have edged up while US futures are in the red.
USD traded in a narrow range, printing another “doji” candlestick. The DXY declined heading into the Asian open but then trimmed losses. EUR/USD extended above 1.02 but saw resistance at 1.0250. GBP continued to climb above 1.2050 but failed to make a meaningful test of 1.21. AUD was boosted by base metal prices but needs to get above the 50-day SMA at 0.6969. CAD benefitted from the jump in crude and is near 6-week highs versus the dollar.
Day Ahead – Earnings in Focus
It’s a huge week for company earnings with 175 S&P500 companies reporting, including 12 of the Dow 30 components. All the megacap tech titans are also releasing their results with Alphabet and Microsoft out after the US closing bell today. The tech sector has an outsized presence on the S&P and Nasdaq. It has already signalled it could suffer from an economic downturn.
Google and Microsoft are reviewing investment plans while Apple has prepared investors for a quarter of slower growth. This group of companies can materially change how investors view this earnings season and how they adjust forward expectations.
The world’s biggest retailer, Walmart, reported yesterday and gave the first unambiguous sign from a major US consumer business that all is not well among Americans in the middle and lower part of the income spectrum. It’s a week of bellwether reports for consumer-goods giants as Coca-Cola, McDonalds and Procter & Gamble also release their earnings. Can US consumers sustain their spending habits given four-decade high inflation?
Chart of the Day – USD/CAD looking to move lower
Commodity prices have steadied in recent days while oil has looks to have found a base. For now, there has also been greater resilience in stock market volatility. These factors are helping CAD, which notched up a 1.3% rise over the greenback last week. The improved risk mood and broader USD tone will dictate price action for this major in the near term. The Fed decision looms large tomorrow with attention on the post-meeting statement language.
Summer flows remain light. USD/CAD has fallen sharply since spiking higher in the middle of the month to 1.3223. Key support is 1.2820, the 50-day SMA sits just above current prices at 1.2853. If we lose support, 1.2790 comes into view. This is the 61.8% Fib level of the June/July rally. The midway point of that move is 1.2873.
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