In the near term, potential losses in equity markets could be capped by fresh quarterly results
After a bounce on Wall Street, Asian stock markets were mixed-to-higher on Tuesday as investors stay cautious amid China-related worries where fresh lockdowns add to nervousness surrounding the outlook for the world’s second-largest economy. European indexes opened higher but struggle to extend the pullback, with US stock index futures pointing to a lower open, suggesting risk aversion could reemerge at any point.
It looks like global equity markets would stay vulnerable ahead of the FOMC policy meeting due next week. The central bank is widely expected to raise its interest rate by 50 basis points. The Fed could also express a more hawkish tone when commenting on the outlook for tightening measures in the coming quarters. Aggressive rhetoric by the bank may add to dollar’s bullishness while pressuring riskier attest further.
In the near term, potential losses in equity markets could be capped by fresh quarterly results. So far, companies are reporting solid quarterly figures. For example, 79% of S&P 500 companies that have reported results thus far have delivered earnings per share that exceeded expectations.
Still, safe-haven flows continue to persist, pushing the greenback to fresh multi-year highs these days. The USD index climbed to the 102.00 mark earlier on Tuesday and could derail this immediate barrier after some short-lived hesitation.
Against this backdrop, gold prices struggle to attract demand after finishing below the $1,900 mark on Monday. The XAUUSD bounced marginally but continues to lack the upside impetus to see more robust gains, holding well below the 20-DMA after the recent plunge. On the downside, failure to hold above the $1,890 local support would add to bearishness surrounding the yellow metal in the near term while decisive recovery above $1,915 may pave the way towards the mentioned moving average, today at $1,940.