Nasdaq – Caution ahead of major central bank meetings, weaker PMIs

• Fed, ECB and BoJ all meet this week
• Weak PMIs point to further cooling in the economy
• NAS100 nears channel lows 

Equity markets are treading water at the start of what is going to be a very lively week.

There are some huge central bank meetings this week, the most notable naturally being the Federal Reserve on Wednesday. Interest rates are finally at or very close to their peaks and this week could see the Fed and ECB announce the last rate hike in their tightening cycles.

And a look at the PMI data may help to explain why, with economies around the world cooling at a decent rate. Inflation is also falling, primarily driven by favourable base effects at this stage, as well as falling energy prices and decelerating food costs.

The PMIs from the eurozone, the UK, and the US today all tell a pretty similar story. Manufacturing is continuing to struggle – although not as much as expected in the US – while services growth expectations are slowing. There are clear signs in the surveys of more cooling on the horizon, fewer inflationary pressures, and weaker hiring.

Central banks will be relieved, though almost certainly not enough to claim victory or explicitly declare the end of the tightening cycle. Policymakers will proceed with extreme caution, albeit very much buoyed by the data they’ve seen over the last month or two.

NAS100 nears channel lows ahead of the Fed

The NAS100 pulled back over the last couple of sessions after coming close to 16,000, a level it hasn’t traded at since the start of last year.

It was previously a notable level of support and resistance as well, which may explain why we’ve seen some profit-taking. It’s now pulled back to 15,250-15,500 where it saw plenty of resistance over the last couple of months and now coincides with the bottom of the rising channel. A break of this could be a bearish development after such a strong recovery this year.

NAS100 Daily

Source – OANDA on Trading View

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