The first
meeting between U.S. President Joe Biden and Chinese President Xi Jinping in
the form of a virtual summit was mostly covered by vaguer clouds as the leader
of China called Biden an “old friend” while also voicing some warnings. During
the virtual summit Xi Jinping warned the United States that it is “playing with
fire” concerning the independence of Taiwan. In response Biden said that Washington
“strongly opposes unilateral efforts to change the status quo or undermine
peace and stability across the Taiwan Strait”.
The two
leaders touched on some other issues like human rights in Tibet, transparency
in preventing future epidemic outbreaks, and climate change. But the three-and-a-half-hour
summit brought no breakthroughs.
However,
markets seem to be satisfied even with this set of discussions as the Hang Seng
index rose by 1,27%. European indices are edging higher with the DAX index gaining
0.55% in the afternoon, while the FTSE 100 was up by 0.19%. U.S stock indices
futures traded mostly sideways, close to the closing on Monday.
Seemingly,
investors are likely to now focus more on the macroeconomic data and monetary
decisions . The U.S. October retail sales are expected to rise to 1.1% against
0.7% in September. Positive expectations are well confirmed by October retails
sales in China that were up to 4.9% year-on-year vs 4.4% in a previous month.
Investors may consider such a rise in retail sales in the U.S. as an
inflationary factor that may push the Federal Reserve (Fed) to speed up
tapering of its still massive bond purchase programme of $105 billion a month in
its December meeting. Given this logic we may see a decline of the S&P 500
broad market index to 4650 points on these seemingly positive figures.
The
situation with global inflation perceptions could be even worse when new
inflation data is released in Canada, the Eurozone and the United Kingdom.
Consensus suggest inflation could accelerate in October. If this is confirmed,
together with rising inflation in the United States that jumped to 6.2% in
October, it may cause another wave of the decline as was seen during last week.
However, this time the decline is likely to be less.
For the
S&P 500 index it would be important to hold above 4650 points. If this
support level is broken, we may see a decline towards the main support at 4600
points that would activate great buy opportunities with a target at new
all-time highs at 4720 points. But this drop would delay the rally and may even
curb it. So, it is important to monitor the levels at which the market will
reach after the publication of these retail sales and inflation data. If the index manages to hold above 4650-4655 points, traders may seek
buy opportunities with the target at 4720-4740 points.
The oil market has surprisingly
shown downward dynamics with Brent crude benchmark prices falling to the range
of $80-81 per barrel following a rebound to $83 per barrel on Tuesday. We may
hardly expect any significant changes in crude prices this week.
Gold prices successfully
retested the support level close to $1840 per troy ounce at the end of last
week. But this retest was very rapid and could not therefore secure a further
rise of gold prices towards $1920 per ounce. Prices may return to the $1840
landmark to retest it properly, and this idea is confirmed by the continuous
strengthening of the Greenback.
EURUSD has failed to
recover from 1.14400 on Friday and is again looking for a decline to
1.11500-1.12500. The President of the European Central Bank (ECB) Christine
Lagarde on Monday blessed a further decline of the Euro by making more dovish
statements regarding ECB’s approach to inflation.
On the contrary,
GBPUSD is on the upside track again this week. Despite a possible surprise
decline to 1.33700-1.33800 on Tuesday, these dips should be used to open buy
positions with a first target at 1.34500 and second target at 1.35500. If the
pair moves straight to 1.34600-1.34700 and crosses it upward, the way towards the 1.35500
target will also be intact.