The main event of the day could be the sinking of two vessels in the Strait of Hormuz as was reported by Reuters earlier on today.
MORNING OVERVIEW
According to Reuters, projectiles struck and sunk two ships in the Strait of Hormuz; the sinking of two ships in the Strait of Hormuz may re-ignite fears about the global oil supply chain stemming from the region. In turn, should strikes continue we may see oil prices gaining support. In terms of US equities, we’re noting a sharp sell-off in the S&P500 and NASDAQ which could be fuelled by data centre debt fears.
MARKET SNAPSHOT
| MARKET | CURRENT | CHANGE | COMMENT |
| S&P 500 | 7700 | -0.24% | AI infrastructure cost worries |
| DXY | 102.12 | -0.05% | US inflation data comes in hotter than expected |
| EUR/USD | 1.1215 | +0.53% | N/A |
| Gold | 4145 | 1.18% | N/A |
| Brent Crude | 104.23 | -0.16% | Two ships sink in Hormuz |
KEY MARKET THEMES
01 — Two ships sink in the Strait of Hormuz
According to a report by Reuters, two tankers were sunk of the Strait of Hormuz. The sinking of two vessels from projectiles could lead to heightened tensions in the region. In turn, the possibility of a re-escalation of tensions in the Middle East could support oil prices should the strikes continue. In our view, the Houthi Rebeles continue to pose a significant risk to the oil supply from the region as seen by the attacks they have committed over the weekend.
Market implication (OIL): Bullish
02 — Australia’s employment data due out tomorrow
The US Equities markets have been facing downwards pressures since yesterday’s trading session. In particular, reports have emerged that investors are worried about the AI data centre debt and the capabilities of companies to continue paying in a higher interest rate environment. In turn, this appears to have resulted in downwards pressures in the tech sector and in particular the NASDAQ. Overall, should worries about the debt incurred from AI infrastructure continue, we may see further pressures being exerted on tech stocks.
Market implication (US100): Bearish
03 — US Inflation
The US inflation data that was released yesterday for the month of September came in hotter than expected. In particular both the headline and the core rates on a yoy basis came in higher than expected, implying an acceleration of inflationary pressures in the US economy. In turn this could increase pressure on the Fed to maintain a restrictive monetary policy stance, which may provide support for the dollar.
Market implication (USD) : Bullish
WHAT MATTERS TODAY
US Retail sales rate
Time GMT+2): 15:30
Expected: 0.3%
Previous: 1.2%
Potential market reaction:
Could weaken USD
ASSET FOCUS
[Gold / Commodities]
XAU/USD appears to be moving in a sideways fashion. We opt for a sideways for the precious metals price and supporting our case is the RSI indicator below our chart which currently registers a figure close to 50 implying a neutral market sentiment. Moreover, we would like to note that the bullion has failed to clear our 4080 (S1) support level. For our sideways bias to be maintained we would require gold’s price to remain confined between our 4080 (S1) support level and our 4200 (R1) resistance line. On the other hand for a bearish outlook we would require a clear break below our 4080 (S1) support line with the next possible target for the bears being our 3945 (S2) support level. Lastly, for a bullish outlook we would require a clear break above our 4200 (R1) resistance line with the next possible target for the bulls being our 4350 (R2) resistance level.
KEY LEVELS
- Resistance (R1): 4200
- Resistance (R2): 4350
- Support (S1): 4080
- Support (S2): 3945
Technical View: Neutral
CROSS-ASSET VIEW
| ASSET CLASS | BIAS | KEY DRIVER |
| US Equities | Bearish | AI data infrastructure cost worries |
| USD | Bullish | US inflation data |
| Gold | Neutral | N/A |
| Oil | Bullish | Two ships being sunk in Hormuz |
TRADING SPHERE VIEW
Bearish for the EUR
Our base case:
Continued political uncertainty in France as the protests continue, whilst the IMF raises growth forecast concerns could weigh on the EUR.
What would change our view:
Measures being taken by the French Government to reduce debt or increase economic growth.
RISKS TO THE VIEW
Snap elections being called
Snap elections being called in France and Germany.
TODAY’S WATCHLIST
01 US Retail sales rate
02 US Philly Fed Business Index
03 BoC Governor Tiff Macklem
DISCLAIMER: This content is for general informational and educational purposes only and should not be considered investment advice or investment recommendation.
