Gold hits 14-month high after Chinese data miss; USD rises after retail sales

Summary:

  • Poor Chinese data sends Gold ot 14-month high

  • Technical overview for Gold

  • USD gains after retail sales; positive revisions

  • DE30: Infineon sinks on broadcom’s sales forecast cut

 

After a strong run higher last week, this time out its been far more steady for equities, with most major stock markets trading not far from where they ended last Friday. Having said that, some news out this morning has threatened to cause some weakness into the weekend with a batch of data from the far east coming in worse than expected.

 

Chinese industrial production in particular was soft, with a year-on-year increase of 5% marking the lowest reading for this metric in 17 years and further supporting the notion of a slowing global economy. The largest market reaction to the Chinese data can be seen in Gold with the market jumping over 1% in response. The price of bullion has moved up to its highest level since April 2018 and at $1355/oz the market is only just over 1% from the 2016 peak. If the market can get up to $1390/oz then you have to go back to 2013 to find a higher price. The Chinese national stats bureau have since attempted to play down the significance of the poor data, but it’s pretty obvious that their economy is slowing. Moreover, given the past lack of credibility associated with economic data from Beijing, the true figures could well actually be even worse.

 

A technical overview of Gold can be found here

 

US headline retail sales increased 0.5% MoM in May, slightly below expectations suggesting a 0.6% MoM increase. On the other hand, core retail sales (ex. Autos and gasoline) rose 0.5%, beating the consensus of a 0.4% rise. Finally, we got a decent increase in case of sales in a control group, a series taken into GDP calculations, as it jumped 0.5% vs. 0.4% expected. In addition to May’s numbers we were also offered substantial revisions to the April’s report: headline sales to 0.3% from -0.2%, core sales saw the same revision, sales in a control group were revised down to 0.4% from 1.1%. The report seems to be quite good especially when we take into account a series of latest disappointments. The EURUSD is trying to break below the important technical level following the data around the 1.1245 level.

 

Infineon Technologies (IFX.DE), as well as the other European semiconductor stocks, was trading lower at the beginning of Friday’s session. The sector is being pressured by yesterday’s action of Broadcom (AVGO.US), the US semiconductor manufacturer. The US company decided to cut its annual sales forecast from $24.5 billion to $22.5 billion citing an escalation in trade war as a reason. Broadcom has significant exposure to Huawei therefore it is severely impacted by the ongoing situation. Apart from that, the company said that broad weakness in the semiconductor market combined with trade tensions makes any rebound in the demand less likely.

 

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Morning wrap (27.11.2020)
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