Splash of trading activity

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Financial and commodity markets analytics

We still observe uncertainty or even nervousness on financial market, it is mostly related to the lack of confidence regarding the Fed being prepared to finish or at least make a pause in the key rate elevation. Let’s remember that the last week the Fed, the ECB and the Bank of England moved their key rates up. When ECB and the Bank of England are ready to continue rising it up, the American regulator is starting to hint on the absence of grounds to make the monetary policy any stricter.

On Monday, as the session opened, the DAX traded in the high volatility conditions. EURO STOXX 50 has started the week with higher volatility too. Both the European indices could not manage to hold around the achieved maximums, suggesting the clear weakness of buyers. We also see elevated volatility inside the indices themselves. After just a couple of hours the market opened, some of the securities traded more than 2% lower the opening price.

It is hard to distinguish a sector that suffered the most. We observe sales in the financial sector, along with construction, retail and even pharmaceutical ones.  All of that suggests that the sales are based upon the overall change of mood regarding the riskier assets and not the problems in this or that sector of the economy of the monetary block.

Bond market:

The uncertainty phase.

We also see an uncertainty phase in the bond market. The demand on the long term bond instruments is increasing thus reducing the buyers’ activity in the stocks market. However it is yet too early to speak about the ascending movement recovery in the 10-year yields of the biggest European economies. The current situation represents more of the uncertainty one, yet with a hue of nervousness.

Oil market

Looking at the oil market, pay your attention to the reduction in the trading activity, which is mostly based upon the uncertainty in regards to the expected demand. Any confirmation that the world economy would slow down, especially those of China and the USA, would provoke a more powerful wave of reduction.

WTI is traded above $73 per barrel. Shall it break through the support level, the sellers would be ready to lower to $70.5. In the meantime Brent holds above $80, though sellers are still testing it in an attempt to develop a more powerful wave of reduction.

The key risk factors:

  • The oil supplies in the USA. Another increase in the volumes would support the bearish scenario.
  • Demand in China. Even though the quarantine restrictions in China have been softened, the experts notice that there isn’t any increase of the crude oil demand levels. This is yet another bearish factor.
  • The US economy sustainability. A moderate worsening of the economy indicators may reduce the probability of another Fed key rate elevation.

This is a bullish signal for the oil.

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