Recession worries | 22 July 2022

#SP500:

A broad-based measure of inflation expectations that has been flagged by Federal Reserve Chairman Jerome Powell rose to a record 2.19% at the end of the second quarter from 2.17% at the end of the first, according to data published on the central bank’s website. Developed by Fed board economists in late 2020, the index of common inflation expectations comprises more than 20 indicators measuring the attitudes of consumers, investors and professional forecasters toward future price increases. The index has risen steadily since the end of 2020. The latest reading was the highest in records dating back to 1999. The release of the index comes after news this morning that consumers expect inflation of 2.8% over the next five to 10 years, according to a preliminary July survey by the University of Michigan. This is a negative signal for the stock market.

Trading recommendation: sell 3930 and take profit 3775.

XAUUSD:

Gold was down on last week, with expectations growing that the U.S. Federal Reserve could hike interest rates more aggressively this month to fight red-hot inflation. Benchmark U.S. 10-year Treasury yields rose, denting demand for zero-yield gold. U.S. consumer prices index jumped 9.1% in June, the highest in four decades. Expectations grew that the Fed could deliver a historic one percentage-point interest-rate hike later this month. Fed Bank of Atlanta President Raphael Bostic said “everything is in play” to combat price pressures. This is a positive signal for the dollar and a negative signal for gold, since assets have an inverse correlation.

Trading recommendation: sell 1733 and take profit 1690.

#WTI:

Oil ended the week below $95 a barrel for the first time since early April after another volatile period of trading marked by escalating concerns over an economic slowdown. Oil has been volatile, particularly to the downside in recent days because of concerns about the state of the Chinese economy and the red-hot inflation print from the US this week. Shanghai’s flareup appears to be stabilizing, but authorities are still locking down parts of the city and housing compounds. Still, data Friday showed Chinese growth at the slowest pace since the country’s first Covid outbreak. Libya is restarting its oil exports and production from all of its fields after reaching a deal with protesters, ending months-long blockade that had halved the OPEC nation’s output.

Trading recommendation: range 93.50 - 99.00