The rally in Wall Street took a breather overnight, as Treasury yields attempted to recover following its post-consumer price index (CPI) sell-off. The US two-year yields were up 7.6 basis-point (bp), while the US 10-year yields crossed above the 4.50% handle – a potential reaction to stronger-than-expected US retail sales.
On one hand, US producer prices continue to mirror the downside surprise in US CPI this week and validated further rate hold from the Federal Reserve (Fed). But on the other hand, more resilient consumer spending as reflected in the retail sales (-0.1% month-on-month versus -0.3% consensus) called for some recalibration in rate-cut expectations. Ahead, a series of economic data ranging from jobless claims, industrial production and housing market index remain on close watch to gauge the moderation in US economic activities.
Aside, Brent crude prices continue to struggle at its previous support-turned-resistance at the 82.50 level with a 2.3% down-move following a larger-than-expected rise in US crude inventories. Its weekly relative strength index (RSI) has moved back below its key 50 level as a sign of sellers in control, as prices failed to cross above its weekly Ichimoku cloud resistance. Further downside will likely challenge its November low at the 79.26 level for a lower low, with any failure to hold likely to pave the way towards the 75.00 level next.
Asian stocks are in for a weaker start, with Nikkei -0.55%, ASX -0.37%, Hang Seng Index -1.02% and KOSPI -0.16% at the time of writing, as the risk rally took a breather. Eyes on the political front were on the high-level talks between President Biden and President Xi, with the former indicating the meeting as making ‘real progress’, but that failed to provide much of an uplift for risk sentiments the way it should. Chinese equities tracked the broader region in the red, with the Hang Seng Index down 1.4%.
Today’s economic calendar saw a significantly larger-than-expected gain in Australia’s employment (55,000 versus 20,000 consensus), but unemployment rate still ticked higher to 3.7% from previous 3.6%, potentially as a result of increased labour supply. The AUD/USD struggled to retain its initial gain in the aftermath of the labour data, as the key 0.651 level of resistance continues to be tested. A move above this level remains crucial to mark a break of its long-ranging pattern since August this year, which could allow the pair to head towards the 0.674 level next. Failing to do so may see the pair retain its consolidation pattern, potentially with a move back towards the 0.636 level.
Wednesday: DJIA +0.47%; S&P 500 +0.16%; Nasdaq +0.07%, DAX +0.86%, FTSE +0.62%