The pivot story from the Fed | 09 December 2022

#WTI:

European Union ambassadors backed limiting the price of Russian oil at $60 a barrel after fraught talks that dragged into the night more than once. Crucially, that’s above the $50 that Russia’s flagship Urals grade already trades at, according to data from Argus Media. The market has shifted to a view that Russian crude oil exports will remain more resilient than previously expected and largely unaffected by the price cap. The G-7 has mostly decided to stop its own imports of Russian crude so the move is aimed squarely at other big buyers such as China, India and Turkey. Now, Moscow’s reaction will be key. Russia has opposed the measure, and threatened to stop production in response.

Trading recommendation: buy 79.20 and take profit 82.50.

#SP500:

U.S. equity funds logged big outflows in the week, as investors booked profit after concerns over economic growth resurfaced due to protests in major Chinese cities against strict COVID-19 policies. U.S. equity funds saw outflows of $17.37 billion, the biggest amount for a week since June 15. U.S. equity growth and value funds both witnessed outflows for a second straight week, with disposals amounting to $6.8 billion and $1.76 billion, respectively. Meanwhile, safer U.S. money market funds received $26.95 billion, the biggest amount in four weeks, and government bond fund attracted $738 million.

Trading recommendation: sell 4130 and take profit 4044.

XAUUSD:

Federal Reserve officials have enough worrisome inflation data to consider raising interest rates to a higher peak than investors expect and potentially follow the half-point hike they’ve signaled this month with the same again in February. Monthly wages rose at the strongest pace since January and US employment surged more than forecast last month, a report showed Friday. That will concern Fed Chairman Jerome Powell, who this week cautioned that slacker job-market conditions and less-lofty earnings growth were needed to cool an inflation rate near a 40-year high. Bets on a downshift to a half-point hike this month were intact after the employment report and investors saw the likelihood of the same again at the Fed’s Jan. 31-Feb. 1 meeting as roughly balanced. Pricing in futures markets shows rates peaking around 5% next year.

Trading recommendation: sell 1830 and take profit 1802.