Stock averages consolidate bases, “risk on” theme intact

Macroeconomic/ geopolitical developments

• The EU agreed on a partial ban on Russian oil.

• OPEC+ agreed on bigger oil-output hikes for July and August on Thursday, but still disappointed the oil market, which rebounded strongly, having previously sold off in anticipation of more aggressive hikes.
• EU inflation hit a new record high at 8.1%.
• Despite markets concerns, US data remains strong, highlighted by Friday’s US Non-Farm Payroll report beating expectations at 390K jobs added.
• However, strong market data is being taken by financial markets as a need for a more hawkish Fed, having a negative impact on riskier assets.

Global financial market developments

• The major US averages dipped slightly last week having posted their first weekly gains for seven weeks the prior.

• The consolidation last week has reinforced the technical “bases” secured by the S&P 500, Nasdaq and DJIA in latter May.
• European and UK indices posted solid gains with the FTSE 100 close to a new cycle high.
• US 10yr yields push backed to higher yields having posted peak in yields through mid-May
• The US Dollar Index posted a modest rebound after the latter May weakness which saw a bearish reversal.
• Gold extended its rebound, despite the USD bounce, reinforcing a base for a still positive tone.
• Oil moved higher again, for a still bullish outlook.

• Copper posted a strong recovery extension to build a better base.

Key this week

• Geopolitical focus: Still closely monitoring the war in Ukraine
• Central Bank Watch: For Central Banks, we get the Reserve Bank of Australia (RBA) interest rate decision, statement and press conference on Tuesday and the same from the European Central Bank (ECB) on Thursday.  
• Macroeconomic data: Mostly a quiet week for data, but we get the key US CPI release on Friday.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued