Soft landing test: More than just CPI 07/10/2024

Hot stories for today
07.10.2024.

Stocks on the move:

• CVS Health (CVS) shares rose 2.7% amid reports that its board is conducting a strategic review, possibly splitting its retail pharmacy and insurance units. The company faces challenges, including higher-than-expected medical costs in its insurance division.
• Zim Integrated Shipping Services (ZIM) shares dropped 12.6% after a tentative agreement was reached to end the U.S. port strike. Other shipping stocks, like Maersk, also fell, with a 5% decline.
• Rivian Automotive (RIVN) shares dropped 3.1% after the company reduced its 2024 production guidance to 47,000-49,000 vehicles, down from the previous estimate of 57,000, citing a supply shortage. This revision raises concerns about the company's future outlook and ability to meet demand. The key question is whether Rivian can regain investor confidence and stabilize its growth trajectory.

Next on oil: 

• Crude oil surged 9% last week, driven by escalating Middle East tensions. Traders bet on $100 oil. Israel’s vow to retaliate against Iran has raised fears of a significant supply disruption, with Iran producing over three million barrels per day.
• Experts warn that further escalation could significantly increase oil prices, possibly disrupting global markets. Exxon and Chevron, with limited Middle East exposure, are seen as beneficiaries, with Exxon shares hitting an all-time high. Wall Street is closely watching the potential closure of the Strait of Hormuz, a critical oil trade route, which could spike oil prices and increase inflation. Goldman Sachs estimates Brent oil could peak around $90-$95 if disruptions persist without OPEC intervention.

Watchlist for today: XOM, NVDA, SMCI, PLTR, PINS, ZIM, CVS, RIVN

US Pre-Market & today’s action:

• Asia-Pacific markets mainly advanced on Monday, with Japan’s Nikkei 225 leading the charge, rising nearly 2% as investors anticipate a series of central bank decisions across the region. Financial and consumer cyclical stocks drove the gains on the Nikkei, with significant players like Mizuho Financial Group and Mitsubishi UFJ Financial Group among the top performers. European markets are also poised for a solid start to the week, lifted by Asia’s overnight momentum and Wall Street’s rally last Friday.
• While stock futures remained calm on Sunday, analysts warned that the upcoming U.S. presidential election and potential “October surprises” could increase market volatility. This week's Key economic events include the Federal Reserve meeting minutes on Wednesday, the consumer price index report on Thursday, and earnings reports from Delta Air Lines and JPMorgan Chase.

Bitcoin

• Why did Bitcoin drop over 6% last week? Rising tensions between Iran and Israel, along with falling institutional demand, fueled the sell-off. U.S. Bitcoin ETFs saw $288 million in outflows, reflecting reduced interest from big investors. Could geopolitical conflicts push Bitcoin even lower? Some analysts warn it might drop to $55,000 if tensions escalate, though Bitcoin bulls are holding firm at a critical support level. Despite the decline, Bitcoin is trying to stabilize around $60,000, with technical indicators suggesting a potential recovery if it breaks through resistance.
  Watchlist: Bitcoin: 60 148-66 510, Ethereum: 2402-2736, Solana: 142.10 -162.50

Forex Market

• The US Dollar had an intense week, with the Dollar Index (DXY) rising for five consecutive days, its longest streak since April. This rally reversed four weeks of declines, where the index had dipped below the 200-week SMA at 100.56. The DXY surged to two-month highs, surpassing the 102.00 mark.
• The Pound Sterling extended its correction against the US Dollar, falling below 1.3100 after hitting 30-month highs. Weighed down by a stronger USD and dovish Bank of England expectations, GBP/USD lost nearly 300 pips last week.
• USD/JPY surged over 1% after the US added 254K jobs, boosting US Treasury yields. Bulls are eyeing a break above 149.39 and 150.00, with resistance at the 200-DMA of 151.06. Support lies at 148.00, and the bottom of the Ichimoku Cloud is around 146.90-147.00. The pair trades at 148.73, driven by the strong jobs report and rising yields.
  Whatchlits: EUR/USD: 1.1046-1.1215, USD/JPY: 141.65-146.60

Basic Materials

• Gold lost its bullish momentum this week after setting a record high, as the strong US Dollar offset safe-haven demand. Despite the USD's strength, geopolitical tensions in the Middle East and upcoming US inflation data are key factors that could drive Gold's movement next week. Due to escalating Middle East tensions, gold initially dropped 1% on Monday but rebounded over 1% by Tuesday.
• Federal Reserve Chairman Jerome Powell’s comments on taking a cautious, data-driven approach to rate decisions supported the USD, keeping Gold under pressure. Investors will closely watch these developments for further cues.
  Watchlist: GOLD 2600-2685, US Oil: 66.50-72.42

The TEFS Analyst team wishes you a successful day!