- Wall Street major index futures are down 0.46% on average.
- The dollar gains momentum at the start of the FOMC meeting and with a cautious climate.
- Sovereign bond yields down, putting pressure on metals.
The mood of investors is not the best on the day of the start of the two-day meeting of the Federal Reserve, before a worsening of the gas crisis in Europe. Futures are falling while the dollar wakes up and rises on all fronts.
The humidity rises, there is no storm yet
The cautious mood in the markets, given the weak economic outlook due to both low growth and high inflation, is worsened by the gas crisis in Europe on Tuesday. In Europe, the DAX falls 0.90%, the CAC 40 loses 0.45%. S&P 500 futures were down 0.42% and Nasdaq futures down 0.55%.
After reporting results Walmart falls 9.70% in the premarket, whirlpool yields 1.95%, General Electric rises 4.35% after reporting a higher profit and General Motors back 2%. The presentation of results for the second quarter has a great deal of attention as it is the busiest week. Among the companies that will present results on Tuesday are Visa, microsoft, Alphabet (Google), Coke Y McDonald’s.
Tuesday begins the two-day meeting of the Federal Reserve. It is widely expected to raise the benchmark interest rate by 75 basis points to 2.50%. What the central bank says is expected to have a broad impact on the markets.
Economic data released on Monday from July manufacturing surveys and the Chicago activity index for June were not positive, but instead contributed to fears of a further slowdown. On Tuesday, the economic calendar shows ahead the S&P CoreLogic Case-Shiller home price data, the new home sales data, the Conference Board consumer confidence and the Richmond Fed manufacturing index. The International Monetary Fund will publish an update of its global growth projections.
In Europe, the focus is on the energy crisis again. On Monday Russia announced that it will reduce the flow of gas (already low) through the Nord Stream 1 pipeline. Today the European Union agreed to a 15% reduction in gas use to deal with a possible shortage in the European winter. In addition to not having supply problems, the great challenge for the region is to remain united with the position with respect to Russia.
Concern about the situation in Europe is weighing on the euro on Tuesday as it is one of the worst performers among the G10. EUR/USD fell below 1.0150, EUR/CHF lost 0.9800 and EUR/GBP is at its lowest in more than a week near 0.8450. GDP data for the second quarter of the Eurozone will be posted on Friday. Negative data could lead to further softening expectations of monetary tightening by the European Central Bank.
The dollar is among the best performers on Tuesday and also rises against those of emerging markets, helped by the context of declines in equity markets.
Oil prices are rising on Tuesday, with WTI at the highest since Thursday. The cryptocurrencies they lose momentum and begin to leave the rebound behind. The Bitcoin is testing $21,000.
The yields of bonds sovereigns find demand. The German 10-year bond falls sharply and is below 1%, at its lowest since May. In the US there are also setbacks with the 30-year bond back below 3%. Despite this, gold does not manage to be favored and after failing with $1730 it approaches $1715. Silver is nearing the bottom, with XAGUSD below $18.50.
Technical levels
Source: Fx Street
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