Daily Market Outlook, December 7, 2022 

China Re-opening Fails To Inspire, Trade & Tech Weakness Weigh

Weakness on Wall Street led by the Nasdaq selling off 2%, as tech names were hit hard, migrated to Asian markets overnight, lacklustre performance in the energy and tech sectors sent the Nikkei lower, with the Shanghai Comp and Hang Seng following suit all down circa 1%. China re-opening buzz was countered with dire trade data from the region, both exports and imports were impacted by Covid, further souring risk sentiment. Stateside, NBC predicts a Democrat win in the Georgia Senate runoff, this gives support to Democrat spending policies in the second half of the Biden administration, markets generally prefer political gridlock, and this projected win added to the pairing of risk appetite for investors, supporting the Dollar & US Yields for a second day.

For the day ahead, Eurozone Q3 GDP data is expected to print at 0.2%, investors will parse the report for indications of new growth drivers in the single currency zone, and particular interest will be given to the employment component as investors assess the strength of the employment market across the region. 

US investors will focus on labour productivity for Q3, market watchers expect upward revisions to lower the rate at which unit labour costs advanced during the quarter, however, the Fed is still likely to deem the rate of increase as to hot and hindering their ability to achieve their inflation target. Across the border in Canada, the central bank is expected to deliver its seventh consecutive rate increase, the only question for markets is the size of the hike, over the last three months they have gradually reduced the rate of rises from 100bps to 50bps at the October meeting, markets are currently pricing at 25bps increase today, although, given continuing strength in domestic employment data, the bank may deliver a 50bps increase. As with the US, investors will be keen to gain a sense of where the bank views the terminal rate for the current cycle, with market watchers sensing that the bank may point to a pause in rate rises as soon as today or by the next meeting in January, with markets expecting a terminal rate of 4.30%, 60bps shy of where the US rate is expected to peak.  

Markets-wise GSK is a standout performer this morning, soaring 13% in early trade as a US court has dismissed thousands of claims against the company’s heartburn drug, claimant assertions that the drug caused cancer have been rejected. The US benchmark SP500 is teetering on the 3900 level, loss of this support will likely see further liquidation, adding support to bond yields and the Greenback ahead of next week’s inflation data and Federal Reserve meeting

Overnight Headline

  • China Is Said To Weigh GDP Growth Target Of Around 5% For 2023

  • China To Ease Quarantine, Unnecessary Testing In New Measures

  • Chinese Exports Hit By Weak Global Demand And Covid Disruptions

  • China Says Monetary Policy Should Be ‘Targeted, Forceful’

  • Australia Economy Slows In Q3 As Inflation Saps Spending Power

  • BoJ’s Nakamura: Need To Continue With Easing Persistently

  • Japan Business Mood Up, Global Slowdown Weighs On Outlook -Poll

  • RBI Raises Key Rate 35Bps As Expected, Inflation Remains Elevated

  • EU Steps Up WTO Cases Against China On Patent, Lithuania Action

  • US Unemployment Rate Set To Surpass 5.5%, Economists Predict – FT

  • Democrats Expand Senate Majority After Winning Georgia Run-Off

  • Dollar To Rebound, Accumulate Safe-Haven Strength In 2023 – RTRS Poll

  • Australia Front-End Yield Curve Inverted Amid Slowing Growth

  • Oil Edges Up On China Demand Hopes; Russian Uncertainty Weighs

  • Russia Could Ban Oil Sales, Set Maximum Discount In Response To Cap

  • Asian Stocks Fall As Growth Concerns Outweigh China Optimism

  • European Tech Groups Lose $400bn In Value Following Funding Crunch

FX Options Expiring 10am New York Cut

  • EUR/USD: 1.0360-70 (1.07BN), 1.0600 (1.01BN)

  • USD/JPY: 134.00 (920M), 136.15 (270M), 138.00 (435M), 140.00 (411M)

  • EUR/JPY: 142.45 (274M), 147.00 (684M)

  • USD/CHF: 0.9225 (250M), 0.9320 (600M), 0.9425 (420M), 0.9560 (400M)

  • EUR/CHF: 0.9750 (281M)

  • GBP/USD: 1.2050 (398M)

  • EUR/GBP: 0.8650 (324M)

  • AUD/USD: 0.6600 (225M)

  • NZD/USD: 0.6350 (261M), 0.6450 (811M)

  • USD/CAD: 1.3200 (1.3BN), 1.3300 (571M), 1.3395 (200M), 1.3540 (2.2BN), 1.3600 (1.27BN)

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 3900

  • Primary support is 3900

  • Primary upside objective is 4120

  • Failure at 3880 opens a test of 3850

  • 20 Day VWAP bullish, 5 Day VWAP bearish

EURUSD Bias: Bullish Above Bearish below 1.0450

  • Primary support is 1.0450

  • Primary upside objective is 1.0620

  • Failure at 1.04 opens a test of 1.0350

  • 20 Day VWAP bullish, 5 Day VWAP bearish

GBPUSD Bias: Bullish Above Bearish below 1.21

  • Primary support is 1.21

  • Primary upside objective 1.24

  • Failure at 1.2080 opens a test of 1.2030

  • 20 Day VWAP bullish, 5 Day VWAP bullish

USDJPY Bias: Bullish above Bearish Below 137.70

  • Primary resistance is 137.70

  • Primary downside objective is 132

  • Acceptance above 138 opens a test of 139.30

  • 20 Day VWAP bearish, 5 Day VWAP bullish

BTCUSD Bias: Intraday Bullish Above Bearish below 16500

  • Primary support is 16500

  • Primary upside objective is 18000

  • Failure at 16400 opens a test of 16000

  • 20 Day VWAP bearish, 5 Day VWAP bullish