All about PMI data this morning

Midday Update

Markets are a bit calming this morning, largely due to the fact that the Ukraine/Russian border episode has not escalated over the weekend, providing a small ray of hope that it won’t escalate into something much worse.

Traders and investors have chosen to look past a very worrying increase in COVID-19 infections in Hong Kong over the weekend. Instead, tension and potential war on the Ukraine dominates.

US futures markets are on everyone’s radar today, following Friday’s brutal sell-off, which saw some big technical levels taken out to the downside for the likes of the S&P500, Nasdaq, and the Dow Jones Industrial Average.

So far, US futures are showing a modest gain. I think we may see the true reaction later on when the Wall Street Bell rings. Personally, I am not convinced that risk-on or market calm can last.

Elsewhere, Treasury yields are also looking calmer since the latter stages of last week, but they remain elevated. 10-year yields are up near 3 bps today to 1.775% but that’s quite a pullback from the high of 1.90% last week.

During the EU session it’s all about PMI manufacturing data. Should we see good numbers it could provide some bullish momentum for markets, but again, I’m not convinced it can last for long.

German PMI data will be the big one to watch. Germany is the lifeblood of the EU economy, so any big misses or beats in this morning PMI data should set the tone for EU stocks.

If the market can get through the day without a big sell-off, it will come back to risk sentiment for now before the focus slowly starts to shift towards key central bank meetings later in the week, with the BOC and Fed lined up.

Foreign exchange markets have probably been the biggest mover, with the EURUSD pair down since Friday, and has traded close to the 1.1300 handle in an already lively Asian session.

Gold is well worth watching today. The yellow metal broke through the technically important $1,830 level last week. If that continues then gold will head higher, if not, it’s a long way down for gold if $1,830 crack, with the $1,800 level the only solid support below.

Silver is hugely interesting. A massive head and shoulders pattern has formed. The battle to invalidate the pattern is on after last week’s pump towards $24.50.

And finally, Bitcoin is down big over the weekend, in a move that started late Friday. $34,000 is the low so far, I think $30,000 could come into focus if that breaks.

Bitcoin has a huge head and shoulders pattern on the daily and weekly time frame right now. Don’t be surprised to see BTC testing under $30,000 sometime this quarter.