Recession!? | 03 June 2022

#SP500:

U.S. equity funds attracted net inflows in the week to May 25 as shares rallied, with stock markets breaking the longest streak of weekly declines since the dotcom bubble burst. Traders purchased U.S. equity funds worth a net $4.61 billion. First-quarter earnings reports available for 491 of the S&P 500 companies show 78% beat expectations. U.S. large-cap equity funds drew net inflows of $9.35 billion, the biggest in 15-weeks, but small- and mid-cap funds saw net outflows of $1.42 billion and $0.75 billion respectively. This is a positive signal for the stock market. The Federal Reserve's hawkish monetary policy stance as it fights to quell high inflation and bring it back to its 2% target has fanned worries of a recession. The U.S. central bank has raised its policy interest rate by 75 basis points since March. The Fed is expected to hike the overnight rate by half a percentage point at each of its next meetings in June and July. This is a negative signal for the stock market.

Trading recommendation: range 4070 - 4210.

#WTI:

Oil prices climbed about 3% to a two-month high on signs of tight supply ahead of U.S. summer driving season. Prices drew support from a big weekly drawdown in U.S. crude inventories. OPEC+ meets on June 2 and is expected to stick to last year's deal to raise July output targets by 432,000 barrels per day, rebuffing Western calls for a faster increase to control prices. The fundamental backdrop is getting price supportive and will turn even more bullish once the EU sanctions on Russian oil sales are endorsed by all parties involved. The oil prices followed a raise some weakening of the U.S. dollar against a basket of currencies, which makes oil cheaper when purchased in other currencies.

Trading recommendation: buy 111.64 and take profit 115.13.

XAUUSD:

Fed policy makers backed raising interest rates by half a percentage point at the June and July meetings after a hike of that magnitude on May 4, minutes of this month’s gathering showed. The Federal Reserve's hawkish monetary policy stance as it fights to quell high inflation and bring it back to its 2% target has fanned worries of a recession. The equivalent of a half-point rate hike from the Federal Reserve has been priced out over the last three weeks, putting the peak in rates at 3% next June. That implies cumulative U.S. rate hikes of 210 basis points this cycle, versus 255 bps at the start of May, according to Fed Fund futures that reflect expectations of future interest rate moves. This is a negative signal for gold.

Trading recommendation: sell 1869 and take profit 1841.