Spreadex Market Update
Chinese Stimulus Disappoints, ECB Debates Rate Hike, US Housing Remains Strong
The financial markets have taken on a risk-off tone as investors express their disappointment with the underwhelming Chinese stimulus. This sentiment has led to a flight to safety, pushing down equities and supporting the dollar. German data also contributes to the deflationary narrative. Meanwhile, gold and crude continue their downward trend.
The Big News
Chinese Equities and Gold Prices React to Stimulus Disappointment Following the release of the Chinese government's stimulus package, investors expressed their disappointment, leading to a drop in Chinese equities, particularly in the housing industry. The stimulus was widely interpreted as underwhelming, and speculations arise regarding further rate cuts in the future. As a result, gold prices tumbled by 0.8% due to a stronger dollar. The precious metal is currently hovering just above the crucial support level of $1,926, and a break below could expose $1,900.
ECB Officials Debate Rate Hike Amid Deflationary Concerns German data adds weight to the deflationary narrative, as the May PPI comes in at -1.4%, falling below expectations. ECB officials present differing views on the path forward. Gediminas Simkus from Lithuania suggests a potential rate hike in September, while Francois Villeroy believes that most of the rate-hike path has already been completed. These contrasting positions reflect the ongoing division within the shared central bank regarding the necessary extent of tightening. The euro ends the session mixed, with the focus shifting to the daily low and high of $1.0892 and $1.0947.
US Housing Industry Shows Resilience Amid Economic Slowdown Despite other indicators signalling a slowdown in the economy, the US housing market demonstrates strength. New building projects in May surpass expectations, indicating continued resilience in the industry. However, the American Trucking Association's monthly report reveals that for-hire truck tonnage remains in recession territory after three consecutive declines. This mixed performance affects yields on treasuries, while the dollar gains strength due to safe-haven flows.
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