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US Close: Surging yields cap stock rally, Boris Survives Confidence Vote, Oil softens, Gold lower as Yields surge, Bitcoin rebound

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US stocks rallied early as improvement with China’s COVID situation, optimism that a strong labor market will help the US consumer handle the latest wave of inflation, and after a wrath of positive news.

With no US economic data releases scheduled for today and a quiet Fed due to the blackout period, US equities followed the rally that started in Asia. With the exception of the latest Musk/Twitter drama, it was mostly positive news from corporate America, which translated to a good start for shares of Amazon, Eli Lilly, Spirit Airlines, and Didi Global.

The stock market rally couldn’t hold as Treasury yields are edged higher as expectations grow for a much more slower deceleration with pricing pressures. Friday’s inflation report will likely show that inflation is not easing just yet, but that the odds of a recession are still low. Wall Street will need to wait for a couple more inflation reports after this one before anyone can confidently make a call as to when the Fed may alter their tightening course.

Boris

Boris Johnson will remain the Conservative leader and UK prime minister. A leadership election won’t be needed after 211 Tory MPs voted for Johnson, while 148 MPs voted against, shy of the 180 needed to sack the PM. This rebellion against PM Johnson was larger-than-expected and may have weakened his position on delivering tax cuts.

The British pound held onto some of its gains as traders only cared about if this confidence vote would lead to a change in leadership. The path for the pound will still be determined by the pace of tightening by the BOE.

Oil

Bullishness for crude prices have hit some exhaustion as the energy market has mostly priced in the EU’s ban on most Russian oil imports, a modest boost by OPEC+, and elevated prices that will surely lead to some demand destruction over the coming months.

Crude prices started to weaken after US trade representative Tai’s comments suggested tariff relief was not coming anytime soon. Expectations were growing that the Biden administration might be doing whatever it takes to ease inflation, but a softer stance on China apparently is not happening.

Oil rallied towards a three-month high after the Saudis delivered a large price increase to Asian customers for July. Despite the modest weakness with oil today, energy traders anticipate a tight oil market will last for a while.

Gold

Gold prices could not shake off a major move higher with Treasury yields. The move in Treasury yields might be more of a reflection of a ton of supply that is going to hit markets, so the weakness for gold might not last too long. Investors will fixate over Friday’s inflation report, which many believe should show that inflation is close to peaking.

If the bond market selloff accelerates, gold could be vulnerable to a plunge towards the $1800 level.

Bitcoin

Bitcoin is definitely forming a base as prices advanced despite some choppiness in equities. Bitcoin above $30,000 is key for some short-term investors and a move above $33,5000 could trigger some technical buying.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.

Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.

Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal.

Ed holds a BA in Economics from Rutgers University.

Ed Moya

Ed Moya



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