Find out why a retreat in US price growth won't necessarily boost markets After Friday’s sell off in US stocks, this adds to our view that the bear market rally we have witnessed in recent weeks may have fizzled out. The bear market rally helped stocks regain some recent losses in the last full trading week of May, however, as we have mentioned, there are too many external risks to drive a sustained rally in risky assets. Rallies during a bear market can be tricky beasts to navigate. Firstly, you tend to see sharp rises in asset prices until they reach a certain resistance zone when the selling sets in once again. That is what we saw last week. Going forward, we may see further pops higher is risky assets in the coming days, as bear market rallies can last for several weeks. However, overall, we think that the market will lack direction for some time yet. The key driver of sentiment this week is likely to hinge on Friday’s US CPI report when we will learn if price growth in the US has finally peaked.  Key levels to watch for in the S&P 500  As we have already discussed, a bear market rally tends to fizzle out as the market gets nervous about pushing the price too high. This is when important technical levels come into play. For example, the S&P 500 managed to retrace 23.6% of its recent decline in last week’s rally, however, this is an insignificant Fibonacci level. It was interesting that the market didn’t push to the 38.2% retracement level, which is a key Fibonacci level, at 4240 level, instead the rally fizzled out around the 4180 level. This suggests a lack of upward momentum, which is why bear market rallies need to be treated with caution. We continue to think that 4240 will remain a key resistance level that will be tough to beat in the current environment.  In this economic cycle there are so many risk factors to creep up on investors including global central bank rate hikes, high inflation and the threat of a recession, which is why the fear trade remains. This does not mean that some individual stocks and sectors won’t do well. If you are trying to pick winners, then you should look to individual stocks rather than stock market indices when you trade. This is because indices that trade a broad range of sectors and stocks need benign economic conditions to lift all stocks in unison. In our view, this is not the right environment for this to happen.  US economic data watch: May CPI  Economic data in the US has been giving mixed signals of late. Economic and consumer sentiment is at a record low, while US payrolls data for May was stronger than expected. Overall, US economic data has been underwhelming expectations, according to the latest Citi Economic Surprise index, which suggests that the economy is weakening in the US, even if there are pockets of strength. It is worth noting that the labour market tends to be a lagging indicator, thus it could take some time for employment levels to fall. But while labour market data strengthens the Fed’s hand when it comes to further rate rises, the US inflation report due this Friday is what everyone is watching. The market wants to know if inflation has peaked. Economists expect that headline CPI rose by 0.7% last month, with the annual rate falling to 8.2% from 8.3% in April. More importantly will be the core rate of inflation, which is expected to rise by 0.5%, with the annual rate falling to 5.9% from 6.2% in April.  Why US inflation may not calm markets  If the estimates of US inflation are correct, then it may give some flicker of hope that inflation in the US has peaked. While petrol and food prices are expected to have continued to rise in May, downward forces on inflation are expected to include autos and a loosening supply chain. However, we think that even if inflation does show that it may be in retreat, there is still a lot of concern out there that it could continue to be a problem for the long term. While Opec has announced that it will boost its production by more than expected later this year, energy supply constraints remain. Likewise, supply chain issues in China could still bite the West in the coming months. Thus, we do not expect a decline in US prices to spur a long-term rally in risky assets, however, we may see the dollar decline slightly.  Meta in trouble without Sandberg on the ship  Overall, we could see European stocks follow US stocks lower at the start of the new week. We will talk about this week’s ECB meeting in...

Another day and another Commodity skyrockets to fresh record highs. That’s one of the most exciting trends of the current Commodities Supercycle that we find ourselves in right now! Commodity prices across the board from the metals, energies to agricultural markets started the week on an absolute tear as China – the world’s second-largest economy and biggest importer of Commodities – officially ended a two-month lockdown on June 1. Since March, China's lockdowns notably in Shanghai, have taken a toll on production, supply chains and spending – slightly easing momentum in the Commodities boom that has been on an unstoppable run since the world emerged from the pandemic in 2021. But once again, in true bull market fashion, as China comes out of lockdown – it comes as no surprise that the Commodities Supercycle is back on track and firing on all cylinders! Oil prices took the lead on Tuesday rallying back $120 a barrel, the highest level since March – on expectations that the Oil market may see an identical V-shape recovery in demand as seen in 2020 when China previously ended lockdown. That event triggered an historic bull run taking Oil prices from sub $40 a barrel in April 2020 to a decade high of almost $140 a barrel in April 2022. That's a record-breaking gain of more than 450%, in the last two years. Elsewhere in the Commodities complex, another star performer this week has been Copper. Copper which is a key metal in infrastructure, electric vehicles and renewable energy surged on Wednesday after China launched a $120 billion credit line for mega Infrastructure and Green Energy projects to stimulate the economy. The cliché move, straight out of an old policy playbook, echoes similarities with President Biden’s ambitious ‘Infrastructure spending frenzy and Green Energy Revolution’, almost exactly a year ago – which played a pivotal role in kick-starting the current Commodities Supercycle. Ultimately, China’s mega Infrastructure and Green Energy push means one thing. China is going to need more Commodities and lots of them. But as we know, for the first time in decades, the world is running out of Commodities at a record pace and facing an historic shortage off the back of a "triple deficit" – low inventories, low spare capacity and low investment. China’s demand is only going exacerbate those issues and inevitably add further fuel to the Commodities Supercycle as global demand continues to outstrip supply and push up prices. Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

The USD strengthened, US yields rose and gold plunged after today's US jobs market data, which came out mixed. At the time of writing, gold was down 0.5%, trading at around 1,860 USD. US labor market remains strong In May the US added 390,000 jobs, which was a drop from last month's upward revised 436,000 and the lowest since April 2021 but was well above the 320,000 expected The unemployment rate remained unchanged at 3.6%, missing forecasts for a reduction to 3.5 percent, the lowest level since the financial crisis. The participation rate ticked up a notch, from 62.2% to 62.3%, in line with consensus estimates. Average hourly wages increased 5.2% on an annual basis, which was in line with predictions and down from 5.5% last month. The monthly wage growth stayed at 0.3%, below the 0.4% predicted. Bears defend strong resistance So far, gold has failed to jump above November highs of 1,875 USD, still giving bears a chance to defend the medium-term downtrend.  However, if gold jumps above that level, larger stop losses of short positions could be hit, likely sending the metal beyond 1,900 USD. On the downside, the significant support lies at the 200-day moving average near 1,840 USD, followed by this week's lows at 1,830 USD. The overall trend seems rather unclear until gold either breaks above 1,875 USD or drops below 1,830 USD.

Gloominess persists after Robust Jobs report and Musk’s Super Bad Feeling, Oil's strong week, Gold eases, Bitcoin below $30,000. Robust hiring in May pretty much guarantees the Fed will move forward with a couple half-point rate hikes at the next two meetings. ​US stocks edged lower as the latest employment report showed slower job growth and potentially softening inflation, but still keeps the door open for the Fed to continue with its rate-hiking campaign well beyond the summer. Softer hiring and cooler wage data suggest that economic growth moderation is happening, but not fast enough to signal a change in course by the Fed. The consumer might be losing the battle with inflation, but spending won’t be weakening so quickly. Stocks may struggle here as the Fed needs to get rates closer to neutral before what seems to be a likely winter slowdown. NFP The May nonfarm payroll report showed that job growth is decelerating and wage pressures appear to be easing. A steady decline in job growth and a cooling of wage pressures should justify the Fed’s course of a couple rate hikes at both the June and July FOMC policy meetings. If Jamie Dimon and Elon Musk are correct with their gloomy outlooks for the economy and the job/inflation data decelerates more quickly, the Fed could pivot at Jackson Hole and signal they may need to change course in September. The US economy added 390,000 jobs in May, much better than the 320,000 consensus estimate, but still down from the upwardly revised 436,000 jobs created in April. The unemployment rate remained at 6.2% as the participation rate ticked higher. Average hourly earnings from a year ago declined from 5.5% to 5.2% as expected, which is welcomed news for the Fed. Wage pressures might be easing here and if that continues to decline, we could see the Fed quickly end its hiking campaign once rates reach their neutral rate. Tesla Tesla CEO Musk reportedly told executives he has a ‘super bad feeling’ about the economy and that Tesla may need to cut staff by about 10%. Wall Street is not used to hearing from CEOs that are straight shooters, so Musk’s warning carries a lot of weight. Pausing hiring worldwide was somewhat expected, but eyeing a cut of 10% of staff, which is around 10,000 employees suggests Tesla will struggle to meet its end of year targets. Commodity prices are not easing fast enough, China’s COVID situation will likely linger, and a weaker consumer will hurt demand for new cars. If Tesla is worried about their outlook, that means the other large car manufacturers are in bigger trouble. Tesla could be vulnerable to a retest of the May lows, but that will likely be a buying opportunity. Tesla will still remain a buy for many on Wall Street as they are still the EV king, energy prices are not coming down anytime soon, and a stock split is likely coming for retail traders. Oil Crude prices are consolidating after an OPEC+ hangover and a robust nonfarm payroll report that suggests the consumer is still in decent shape. Oil will be a very choppy trade given bullish exhaustion could be settling in following the modest output boost by OPEC+ will still keep the oil market tight, a strong summer driving/travel season is here, growing optimism for the demand outlook with China’s reopening, and as some traders are expecting that President Biden’s trip later this month to Saudi Arabia could lead to some relief for oil prices. This oil market will remain tight throughout this summer, so there should be further upside for oil prices. Unless, Biden's trip leads to a breakthrough of more output by the Saudis, oil will head higher as we don't see any significant signs of crude demand destruction. ​ ​ ​ ​ Gold Gold prices edged lower after a robust nonfarm payroll report sent the dollar higher. Traders were expecting to see a stronger deceleration with job growth that could possibly make the Fed pivot away from a half-point rate hike in September(June and July are now widely expected to be 50bps hikes each). The economy is not softening quickly and that took away the need for safe havens today. Growing doom and gloom calls however should keep the precious metal supported over the short term. Bitcoin Bitcoin remains anchored and is following the move lower in equities. Fed rate hike expectations need to come down for Bitcoin to stabilize further and today’s job’s report did not help.

The effects of soaring energy prices are being felt by almost all companies. Aviation, shipping and chemical firms are directly impacted by higher energy prices. The food industry, travel agencies and hospitality are impacted by second-round effects. Corporate decision-makers have some tools available to mitigate the impact. High energy prices are the new normal for business leaders European energy markets became very tight and volatile in the autumn of 2021 due to concerns about limited gas reserves for the winter months. Luckily, Europe was saved by a relatively mild winter, but by the time concerns in the market diminished, Russia invaded Ukraine. Energy markets have remained very volatile and tight with energy becoming part of the conflict. Europe has implemented a ban on coal and oil. In turn, Russia has reduced gas flows to the EU in several small steps that now amount to around 23 billion cubic metres (bcm), which is about 15% of the total Russian gas supply to the EU. The implication for corporate decision-makers is that energy prices are likely to remain high for much longer. Gas prices are expected to stay above €70/MWh until 2023 and oil prices well above $80 until 2024. We first assessed the impact of high energy prices on sectors in our article The ripple effects of soaring energy prices. This article provides an update. Gas prices are expected to stay above €70/MWh until 2023 TTF natural gas futures for the Netherlands in €/MWh as of 2 June Source: ING Research based on Refinitiv Oil prices are expected to stay above $80 until 2024 ICE Brent oil price futures in $/barrel as of 2 June Source: ING Research based on Refinitiv First and second-round impacts of high energy prices Higher energy prices can impact companies in many ways. The immediate impact is through higher costs from rising energy prices (first-round impact). In the new normal, where energy prices are likely to stay high for at least the next two years, there will be second-round effects too. Energy-intensive companies pass on higher energy prices to their clients in varying degrees. As a result, clients are also confronted with higher costs. The production of energy-intensive products could also become unprofitable due to high energy prices. Producers might lower production levels which could create temporary shortages further up the supply chain. In this article, we look at the impact of higher energy prices on companies in different sectors, in terms of both first and second-round price effects. We find that sectors are impacted differently according to their energy intensity and the type of energy they use. Aviation and shipping, for example, are the most energy-intensive sectors and are especially impacted by high oil prices. Highest first-round effects in aviation and shipping Most industrial sectors are energy-intensive, too, but they rely more on gas for heating and feedstock purposes, where prices have skyrocketed. There are also sectors that are less energy-intensive such as construction, trade and the automotive industry. High energy use in aviation, shipping and chemical industries Use of terrajoule energy per € 1 million Value added output, EU-27 in 2018* Source: Eurostat, ING Research Second-round effects could be substantial in the food and rubber industries, and for travel agencies and hospitality Companies with high oil and gas use are not the only ones dealing with soaring energy prices. High energy users will, to varying degrees, pass on high energy prices, albeit with some delay. For instance, the food and beverage industry procures many products from agriculture. If farmers have to increase their prices due to higher energy costs, the food industry faces higher prices too. Travel agencies also purchase a lot from energy-intensive sectors such as aviation and road transport. They are faced with more expensive plane tickets when airline carriers are forced to increase ticket prices due to higher kerosine costs. Second-round effects of high energy prices are largest in the food and beverage industry Procurement from very energy-intensive sectors (see graph above) as a share of total production, 2018* Source: Eurostat input-output tables, ING Research *Unweighted average of EU countries with data available. Note that the other part makes up for procurement of other materials, goods and services, wages and profit margins. Four different ways in which sectors are impacted by high energy prices Sectors that use a lot of energy are not by definition hit hard by rising energy prices. The impact depends on their profit margins and the ability to pass on price increases to clients. A previous article by us provides more detail on our methodology. Sectors vary in the degree to which volatile input prices impact profit margins Sector development in The Netherlands, 1997-2020* Source: Eurostat input-output tables, ING Research *Based on statistical input-output tables. Volatility input prices: standard deviation of prices development Intermediate consumption Impact profit...

GBPJPY is attempting to push north of the high of 163.57 from the 5 May, coincidently where the upper Bollinger band is currently located. The pair is maintaining its bullish demeanour, forming its eighth daily consecutive green candle, after the price unearthed significant upside pressure from around the 158.00 region, where the 100-day simple moving average (SMA) formed a defence. The upward creeping SMAs are suggesting that the positive trend is intact.