Risk sentiment steadies, US inflation data due
Dow Jones => The index falls from 33100
WTI Oil => The commodity rises towards $95
DAX => The index rises to 14300
Dow Jones slips ahead of inflation data
After a weak start yesterday, as Russia invaded Ukraine, risk sentiment rebounded, and the Dow Jones managed to close in positive territory. The sanctions imposed on Russia were not as harsh as feared, helping stocks higher.
In addition to Russia, Ukraine headlines, which are likely to drive risk sentiment, US core PCE inflation data is due to be released. The data comes as question are swirling over whether the Fed rate hike next month will be 25 or 50 basis points? Strong inflation data would come after upbeat jobs data and better than expected Q4 economic growth. US Q4 GDP was upwardly revised to 7%, from 6.9% on an annualised basis. However, given the recent bout of uncertainty caused by the Russian invasion, expectations of a more aggressive Fed could have eased. Today’s data is the final PCE print before the Fed meeting. High inflation could hurt demand for stocks.
| U.S. Q4 GDP
U.S. Core PCE |
Actual: 7% (0.1%)
Expected: 5.1% (10k) |
Previous: 6.9%
Previous: 4.9% |
Where next for Dow Jones?
The Dow Jones continues to trade below its two-week falling trend line and below its 50 & 100 sma on the 4-hour chart.
The index found support at 32250, before rebounding and bringing the RSI out of oversold territory. The bullish crossover on the MACD is keeping buyers’ hopeful of further upside. However, the recovery is stalling at 33100, the January low.
Buyers need to retake this level in order to push higher 33500 the February 21 low to expose the 50 sma and falling trendline resistance at 34000. Failure to re-take 33100 could see the price come under pressure again and head towards 32250.
Oil rises with Russia headlines still in focus
After surging to fresh 7-year highs in the previous session, on the news that Russia was invading Ukraine, oil prices then pared most of those gains to end the day just 0.7% higher. Oil prices rallied $8 to a high of $100 on fears of supply disruption. However, after it became clear that sanctions from the West aimed at Russia would avoid the energy sector, oil swiftly fell back to $93.00.
A larger than expected increase in crude oil inventories also helped pull the price lower, in addition to comments by US President Biden that the US could release further oil reserves to ease the tight oil market. Today oil prices are climbing again as Russia, Ukraine developments stay in focus. Baker Hughes rig count data is due later today.
DAX rebounds, set for 5% weekly loss
The DAX closed 4% lower in the previous session as Russian invade Ukraine and on fears of a full-scale war breaking out in Europe.
Today risk appetite is returning, and the DAX is due to open higher. Attention will remain on Russia, Ukraine headlines. However, German GDP data could also gather some attention. The final revision for the fourth quarter is expected to show a -0.7% contraction.
The German Bundesbank, at the start of the week, warned that Germany will likely see a contraction again in the first quarter of this year, a technical recession, as Omicron kept people from work. However, the eurozone’s largest economy is expected to rebound in the Spring.
| German GDP QoQ Q4 | Expected: -0.7% (5.9%) | Previous: 1.7% |
Support for the pair can be seen at 14000 (round number) and 13830 (2022 low)
Resistance can be found at 14800 (14 February low) and 15000 (round number)
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