Daily Wrap Up 25 July 2022

25 Jul 2022 05:02 PM

Stocks mixed, dollar recovers

Equity markets are experiencing low volatility today as traders look ahead to the Federal Reserve’s meeting on Wednesday, interest rate futures are factoring in a high probability of a 75-basis points hike. The latest US CPI and PPI reports were hot and that triggered conversations about a potential 100-basis point hike, but that outcome seems less likely considering last week’s disappointing Philly Fed manufacturing and flash services PMI reports. The US 10-year yield has ticked up to 2.83%. Given there is a lot riding on Wednesday’s Fed meeting, it could be the case that investors and traders sit on their hands ahead of the update.

A mentioned above, the US revealed some poor economic reports last week, and this morning the German IFO business climate report fell to 88.6, its lowest in two years. Germany is facing high inflation, a very recent rise in interest rates, uncertainty over energy security, and that is all feeding business sentiment. Germany is the powerhouse of Europe, so it spells troubles for the entire continent if optimism is fading. The DAX is showing a small loss, and it is underperforming its peers as the FTSE 100 and the CAC are marginally higher. Across the pond, traditional stocks are a touch higher as the Russell 2000 is up 0.2%, while the technology focused NASDAQ is 0.3% lower. This week will see the release of quarterly results from some of the biggest names in tech, as Alphabet, Apple, Amazon, and Meta Platforms will post their numbers. These are some of the biggest companies in the world so their outlook could set the tone for the week.

The US dollar was firmly in the red a few hours ago when the 10-year yield was below 2.80% but the nudge up in yield has helped the greenback recover all the ground it lost. EUR/USD has been trading in a range since last week’s ECB rate hike, and it feels as if traders are unsure which way to turn. Bullion saw a turnaround because of the dollar. Gold and silver were showing gains this morning but now they are down 0.6% and 1.7% respectively. WTI is 1.6% higher as it made a recovery from the losses seen at the end of last week.

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