China’s economic data once again falls short of expectations. Gold regains its shelter asset status

By JustMarkets

At Monday’s close, the Dow Jones Index (US30) added 0.14%, and the S&P 500 (US500) was up by 0.30%. The NASDAQ Technology Index (US100) closed yesterday positive by 0.66%. Reports of progress in the debt ceiling negotiations fuel investor optimism that US lawmakers can break the current impasse and agree to increase the federal budget and prevent the United States from defaulting on its debt. President Biden is scheduled to meet with House Speaker Kevin McCarthy and other congressional leaders today.

Beyond politics, the focus remains on regional banks, which have partially recovered from last week’s sell-off: PacWest Bancorp (PACW) jumped by 17%, Comerica Inc (CMA) increased by 7%, and Zions Bancorporation (ZION) has added over 8% yesterday. Nevertheless, despite the rally, concerns about the banking sector remain. Data released on Friday showed that US commercial bank deposits fell for the second week in a row, and lending activity declined strongly after a month of growth.

As for economic indicators, the Empire State manufacturing index for May fell more than expected, indicating a continued slowdown in manufacturing activity.

Microsoft Corporation (MSFT) got approval from EU antitrust regulators to buy Activision Blizzard (ATVI) for $69 billion. But Microsoft will also have to appeal against the decision of the British Competition Authority, which had earlier blocked the deal.

Stock markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.02%, French CAC 40 (FR40) added 0.05%, Spanish IBEX 35 (ES35) lost 0.35% on Monday, British FTSE 100 (UK100) closed the day up by 0.30%.

Oil prices increased yesterday as the US government confirmed plans to start replenishing its depleted strategic oil reserves (SPR). The Department of Energy (DOE) said on Monday that it would purchase up to 3 million barrels of oil for SPR. Oil prices were also helped by news of supply cuts in Canada due to wildfires.

Gold prices fell slightly yesterday as a number of Federal Reserve officials warned that interest rates could still rise amid relatively high inflation and a robust labor market. Gold has an inverse correlation to government bond yields, which tend to rise when rates rise. Nevertheless, gold’s medium-term trend remains bullish. Unless the US somehow raises the government debt ceiling, investors will sell off dollars in favor of gold as a shelter asset. If there is no US default, there is a high probability of a pause by the Fed in June, which would also be a green flag for gold.

Asian markets rose strongly yesterday. Japan’s Nikkei 225 (JP225) gained 0.81%, China’s FTSE China A50 (CHA50) increased by 1.33%, Hong Kong’s Hang Seng (HK50) jumped by 1.75%, India’s NIFTY 50 (IND50) added 0.46%, and Australia’s S&P/ASX 200 (AU200) was up by 0.14% over the Monday.

Industrial production in China rose less than expected in April (actual 5.6%, expectations 10.9%). Lower-than-expected retail sales data (actual 18.4%, expectations 21%) suggest a sluggish economic recovery this year. Fixed-asset investment, a key indicator of business sentiment for the coming months, rose by 4.7% in April, below the 5.5% increase expected and slower than the 5.1% increase seen in March. The unemployment rate fell from 5.3% to 5.2%. But looking at the numbers from a non-expected perspective, China’s economy is recovering, but not at such a fast pace.

S&P 500 (F) (US500)  4,136.28 +12.20 (+0.30%)

Dow Jones (US30)33,348.60 +47.98 (+0.14%)

DAX (DE40) 15,917.24 +3.42 (+0.021%)

FTSE 100 (UK100) 7,777.70 +23.08 (+0.30%)

USD Index 102.71 +0.65 +0.63%

• – Australia RBA Meeting Minutes (m/m) at 03:30 (GMT+3);
• – China Retail Sales (m/m) at 05:00 (GMT+3);
• – China Unemployment Rate (m/m) at 05:00 (GMT+3);
• – UK Average Earnings Index (m/m) at 09:00 (GMT+3);
• – UK Claimant Count Change (m/m) at 09:00 (GMT+3);
• – UK Unemployment Rate (m/m) at 09:00 (GMT+3);
• – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – Eurozone GDP (q/q) at 12:00 (GMT+3);
• – Eurozone Trade Balance (q/q) at 12:00 (GMT+3);
• – Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
• – US Retail Sales (m/m) at 15:30 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 17:00 (GMT+3);
• – US FOMC Member Williams Speaks at 19:15 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.