Geopolitics and Historic Bond Chart | Morning Express 08/2/2022

Posted: Aug. 2, 2022, 8:49 a.m.

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30-year Bond futures broke through a support trend line created more than 20 years ago and are now back-testing it as resistance.

 

 

E-mini S&P (September) / NQ (September)

S&P, yesterday’s close: Settled at 4120.50, down 13.00

NQ, yesterday’s close: Settled at 12,962.50, down 9.00

Fundamentals: U.S. equity benchmarks are probing lower as they digest last week’s surge higher. House Speaker Pelosi has ruffled the geopolitical landscape and sparked a risk-off undertone due to her anticipated visit to Taiwan. The Chinese government has rallied a military presence near the median line, an unofficial border between China and Taiwan in the Taiwan Strait. Chinese officials have stepped up their rhetoric with the Foreign Minister Wang Yi saying such a visit “will come to no good end”. Lui Xiaoming, the CCP’s Representative on Korean Peninsula Affairs said, “her visit constitutes a gross interference in China’s internal affairs, seriously undermines China’s sovereignty and territorial integrity, wantonly trample on the One-China principle.” Her plane is expected to arrive at 9:20 CT.

Today’s economic calendar brings a mix of earnings, economic data, and Fed speak.

BP topped estimates and boosted its dividend. Marathon Petroleum followed this morning by also beating top- and bottom-line estimates. Both stocks are up nearly 3% ahead of the bell. Pioneer Natural Resources and Occidental Petroleum both report after the bell. Can they keep the bullish tone across energies rolling? Uber is up more than 10%, driven by strong revenues, despite a miss on EPS. Marriot is also trading favorably after topping estimates as travel demand continues to recover. SPGI and Caterpillar are slipping by about 3% after underwhelming reports, highlighted by misses. AMD, PayPal, Starbucks, and Airbnb headline after the close.

Do not miss our daily Midday Market Minute, from yesterday.

JOLTS Job Openings are due at 9:00 am CT. Chicago Fed President Evans, a 2023 voter, speaks at 9:00 am CT and St. Louis Fed President Bullard, a 2022 voter, speaks at 2:30 and 5:45 pm CT. Tomorrow, we get ISM Non-Manufacturing PMI.

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NQ (September)

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Crude Oil (September)

Yesterday’s close: Settled at 93.89, down 4.73

Fundamentals: Crude Oil is attempting to stabilize after holding a higher low overnight at 92.59 versus yesterday’s 92.42. Price action reversed sharply on Friday and slipped as much as 9.3% through Monday’s session for several reasons highlighted here yesterday, and not the least of which another technical failure at the 21-day moving Friday. Demand fears amid deteriorating global growth, highlighted after weak Chinese Manufacturing data over the weekend, have been the undertone ahead of this week’s OPEC+ meeting. After unwinding its pandemic production cuts through August, the cartel is weighing whether to increase production tomorrow. A small increase has been priced in, but the risk of a larger increase is certainly weighing on sentiment. We do believe this could pave the way for a buying opportunity. Also, domestic inventory data will impact the picture as the session unfolds into tomorrow. Early estimates show -0.46 mb Crude, -1.633 mb Gasoline, and +0.917 mb Distillates.

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Gold (December) / Silver (September)

Gold, yesterday’s close: Settled at 1787.7, up 5.9

Silver, yesterday’s close: Settled at 20.362, up 0.165

Fundamentals: Gold has regained the $1800 mark. Can it cling to this psychological mark through settlement? Although the U.S. Dollar Index is firming from a one-month low, which the level achieved in and of itself has been supportive to Gold’s recent rally, the USDCNH has slipped by 0.25%, paring some of yesterday’s gains, and the Treasury market remains very firm (see historical chart above). These, coupled with the heightened geopolitical landscape ahead of Speaker of the House Pelosi’s visit to Taiwan, have helped keep a bid under precious metals into a thick area of resistance. All things considered, including the 30-year Bond chart highlighted above, if you are pressing longs into here, you are probably offsides. The headlines are driving price, will Pelosi’s visit provide a miniature ‘buy the rumor, sell the news’ ahead of economic data. Regardless, it is important to manage your position ahead of this week’s deluge of data that leads into Nonfarm Payrolls on Friday.

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Silver (September)

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