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Markets are steadier after a rocky start of the week

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
US-made capital goods and shipments increased solidly in May, pointing to sustained strength in business spending on equipment

The US Durable Goods Orders figure beat all expectations with substantial increases in May in both the headline and core figures, which exclude defense and aircraft goods.

 

In addition, the number of homes pending sale also experienced a significant rise in May, well above the data forecast by the market.

 

With these two important figures that show strength in the North American economy, the expectations of a recession, which has been talked about so much recently in the market, diminish considerably at least in the short term.

 

Stock markets rebounded strongly on releasing this data, although, at the end of the session, they fell back with slightly negative closings.

 

The reason may be that the Fed's interest rate front is opening. Treasury bond yields rose on the news, with the 10-year bond reaching the 3.19% zone. The Fed may have more reason to push interest rates higher with a strong economy. However, despite the market interest rate rally, market risk sentiment improved significantly compared to the last few weeks.

 

The probability that the desired balance between economic growth and a more restrictive monetary policy to combat inflation seems to have grown with the data we are getting to know. This is how the market interprets it with a behavior of greater risk appetite.

 

The US Dollar showed erratic behavior, declining against the Euro and strengthening against the rest of the major currencies.

 

In the commodities markets, there were rises in oil and Natural Gas that can be considered as simply technical corrections. In oil’s case, rumors circulated in the market that Saudi Arabia and the United Arab Emirates were at the maximum of their production capacity and could not remedy the supply shortage problem with increased production. This is something that has been considered in the market as a possibility. In any case, that rumor was denied by the Emirates authorities.

Today a relevant figure will be published that can impact the market, especially on the stock market; this is the consumer confidence in the United States. A figure equal to or higher than expected would be well received by the North American indices.

The DowJones index closed unchanged from the previous day. Technically, it remains in a bullish correction that could start to gain momentum if it breaks above the 31,900-32,000 zone.

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Sources: Bloomberg, Reuters

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.