German inflation and US consumer confidence in focus
DAX -> The index rises towards 13000
Baidu -> The stock trades 7% higher across August
USD/JPY -> The pair falls from 139.00
DAX rises as Germany reaches gas storage target early
DAX closed 0.6% lower in the previous session, adding to losses of 4.5% last week.
The market mood remained depressed following Fed Chair Jerome Powell’s hawkish speech on Friday. European gas prices slumped 20% as German announced that it had achieved its gas storage target. This helped the index rise off session lows, and futures extend gains ahead of the open.
Today the index is rising as attention turns to German inflation data, which is expected to show that consumer prices rose again. With wholesale inflation at 37.2%, consumer prices are expected to remain elevated, piling pressure on the ECB to hike interest rates aggressively in September. A 75-basis point hike is looking increasingly likely.
| Ger. inflation | Expected: 8.8% (0.3%) | Previous: 8.5% |
Where next for DAX?
The DAX has rebounded lower off resistance at 14000, falling below the 100 & 50 sma and hitting a low yesterday of 12700. The RSI supports further decline while it remains out of oversold territory.
Sellers need to take out 12700 yesterday’s low to target 12430, the 2022 low. Buyers will look for a move over 13000 and the 50 sma at 13200 to negate the near-term downtrend and expose the 100 sma at 13620. A move over 14000 creates a higher high.
Baidu Q2 earnings preview
Baidu is set to report Q2 earnings today after Q1 earnings impressed.
The online search engine and marketing company is expected to report EPS of $1.54, down 38% year on year, on revenue of $4.29 billion, which would be a 13% drop year on year. Continued disruption from COVID has hurt the economically sensitive core business area of advertising and streaming affiliate iQiyi.
The firm could focus more on cloud computing and self-driving technology moving forwards, putting the outlook in focus. The data comes as the stock trades up by around 1.4% year to date compared to the S&P 500, which trades down 12% across the same period.
USD/JPY eases back ahead of consumer sentiment data
USD/JPY rose to 139.00 yesterday and ended the session 0.38% higher.
Central bank divergence helped boost the USD following Federal Reserve Powell’s speech at Jackson Hole. The Fed is prepared to raise interest rates and leave them elevated to stamp out inflation, a move the market wasn’t expecting. This starkly contrasts with the BoJ’s accommodative monetary policy of low rates for longer.
Today the pair is edging lower as US consumer confidence and JOLTS job openings come under the spotlight. Consumer sentiment is expected to rise off July’s record low, and job openings are expected to ease to 10.6 million, which still points to a very tight jobs market.
| US consumer confidence | Expected: 97.9 (2.2) | Previous: 95.7 |
Support can be found at 138.00 (round number) and 135.90 (50 sma).
Resistance for the index can be seen at 139.40 (2022 high) and 140.00 (round number).
