17 May

A decline in US retail sales indicates consumer weakness. Gold declines, but the outlook remains bullish

May 17, 2023

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) decreased by 1.01%, and the S&P 500 Index (US500) fell by 0.64%. NASDAQ Technology Index (US100) closed yesterday down by 0.18%. After disappointing quarterly results, falling shares of Home Depot put pressure on shares. Home Depot (HD) stock fell more than 2% after reporting quarterly earnings that fell short of Wall Street expectations due to falling lumber prices. Retailer sentiment was also hurt by US retail sales data that fell short of expectations, signaling weaker consumer sentiment. The energy sector was the biggest headwind for the overall market, as weaker-than-expected economic data from China overshadowed expectations for higher energy demand.

Other economic data showed that US industrial production and manufacturing activity rose unexpectedly in April. Total industrial production increased by 0.5% m/m in April. The US manufacturing production rose by 1.0% m/m, beating expectations of 0.1%.

US President Joe Biden will partially shorten his trip to the G-7 leaders’ summit to intensify efforts to make progress on the debt ceiling agreement. Policymakers remain unable to reach a consensus, which increases the likelihood of a US default on June 1st.

Equity markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.12%, French CAC 40 (FR40) fell by 0.16% yesterday, Spanish IBEX 35 (ES35) lost 0.11% Tuesday, British FTSE 100 (UK100) closed the day negative by 0.34%.

Eurozone GDP grew by a modest 0.1% over Q1 2023. The ZEW Institute report showed that the economic prospects of Germany and the Eurozone are starting to deteriorate again, and the reason for that is the steady inflation and rising interest rates.

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Gold, the supposed hedge against economic and political turmoil, fell below $2,000 for the first time since early May. Economists are attributing the decline in gold prices to a possible bipartisan deal that would end the impasse and avoid a US default. But in the medium term, even if the debt ceiling is raised, the US Federal Reserve will press pause on its interest-rate hike cycle this summer, causing US government bond yields to begin falling, giving a boost to gold and silver.

The International Energy Agency raised its forecast for global oil demand by 200,000 BPD to a record 102 million BPD. Demand on the eve of the summer months is slowly but growing. With lower production, the bullish outlook for oil remains until autumn.

Asian markets traded yesterday without a single dynamic. Japan’s Nikkei 225 (JP225) gained 0.73% yesterday, China’s FTSE China A50 (CHA50) lost 0.39% on the day, Hong Kong’s Hang Seng (HK50) gained 0.04% on the day, India’s NIFTY 50 (IND50) fell by 0.61%, and Australia’s S&P/ASX 200 (AU200) was negative 0.45% on Tuesday.

The Nikkei 225 index jumped by 0.9% to a near 20-month high, continuing its recent gains as data showed Japan’s GDP grew more than expected in the first quarter, boosted mainly by strong consumer spending and outbound tourism. But the outlook for the economy remains bleak amid a sustained downturn in Japan’s largest export markets in the West.

Wage growth in Australia hit a decade high, but quarterly growth fell short of forecasts. The wage price index rose by 0.8% in the March quarter from the previous quarter. This provides some temporary solace for policymakers who fear that the price and wage spiral could lead to more rate hikes. Annual wage growth is expected to peak at 4.0% later this year and then decline to 3.7% by mid-2025.

S&P 500 (F) (US500) 4,109.90 −26.38 (−0.64%)

Dow Jones (US30)33,012.14 −336.46 (−1.01%)

DAX (DE40) 15,897.93 −19.31 (−0.12%)

FTSE 100 (UK100) 7,751.08 −26.62 (−0.34%)

USD Index 102.63 +0.19 +0.19%

Important events for today:
  • – Japan GDP (q/q) at 02:50 (GMT+3);
  • – Australia Wage Price Index (q/q) at 04:30 (GMT+3);
  • – Japan Industrial Production (m/m) at 07:30 (GMT+3);
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
  • – UK BoE Gov Bailey Speaks at 12:50 (GMT+3);
  • – US Building Permits (m/m) at 15:30 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (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.


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