InvestMacro

By George Prior

The extreme heatwave crisis scorching parts of the UK, Europe, the U.S. and Asia underscores that private finance must be urgently unlocked and mobilized by the financial sector, as politicians continue to skirt the issue.

This is the call-to-arms cry from Nigel Green, the chief executive and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations.

He says: “The consequences of years and years of outrageous inaction from politicians on the climate crisis are now being laid bare.

“The UK’s Met Office has issued its first-ever ‘Red Extreme’ heat alert; the worst heat wave in Europe is causing an avalanche of devastating wildfires across Spain, Portugal, Croatia and France; a heat dome has formed over the southwest and central U.S, smashing temperature records; and almost 90 cities in China are living under heat alerts.

“Data shows heatwaves have been on the rise in recent years, yet governments around the world are either unwilling or unable to funnel the resources necessary to try and tackle the problem head-on.”

He continues: “Trillions of dollars are needed. This is why it is now critical that private money is unlocked and mobilized in the battle to mitigate the worst effects of human-created climate change.

“For this to happen, all sectors within the financial industry need to step-up, including financial advisories, insurance firms, banks, wealth and asset managers, investment companies, fintech groups, banks and auditors.

“If we fail on this, the level of finance will not be available, nor at the pace necessary, to halt the catastrophic effects of global warming.”

The deVere Group CEO’s calls come after he has publicly criticized some within the financial advisory industry who fail to urge clients to invest in Environmental, Social and Governance (ESG) orientated investments.

“I would say to that those in our industry who are looking to weaponize or politicize ESG investing by branding it as ‘woke virtue-signalling’, amongst other things, that they are placing themselves and their companies on the wrong side of history,” he wrote in a column in FT Adviser.

“The so-called ESG backlash is misguided and shallow.”

He goes on to add that clients’ investment strategies would also benefit.

“Funds investing in entities with robust ESG credentials have outperformed their benchmarks over recent years. From a risk management point of view, including these companies in your portfolio is, clearly, a sensible decision to take.”

It’s an issue on which Nigel Green’s been increasingly vocal in recent years. Last year ahead of COP26, deVere Group became one of 18 founding signatories of the UN-backed Net Zero initiative, the international alliance of powerhouse global finance companies that will help accelerate the transition to a net zero financial system.

The deVere CEO concludes: “If mega amounts of private money are not urgently put towards battling climate change – the defining issue of our time – we are doomed to fail.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By JustForex

The US Producer Price Index, which shows the rate of inflation between factories, added 1.1% over the last month while it was expected to rise 0.8%. On an annualized basis, the index reached a record 11.3%. Meanwhile, yesterday Federal Reserve officials Waller and Bullard said that they favor a 75 basis point hike at the US central bank’s July meeting, making a more aggressive move of 100 basis points less likely. Fed funds futures now indicate a 31% chance of a 100 basis point increase and a 69% chance of a 75 basis point increase. But analysts still expect the dollar to rise as it benefits from the higher prospect of rate hikes than other global central banks.

Tech stocks rebounded from lows as Treasury yields fell amid a rebound in the US Dollar Index. But the banking sector showed weakness yesterday on reports. JPMorgan said it would temporarily suspend share buybacks after its second-quarter earnings report missed estimates, sending shares down more than 3%. Morgan Stanley also reported lower second-quarter earnings due to weaker results from its investment banking business.

US indices traded mixed yesterday. By the close of trading, the Dow Jones index (US30) decreased by 0.46%, while the S&P 500 (US500) lost 0.30%. Technology Index NASDAQ (US100) added 0.03% yesterday.

Equity markets in Europe were mostly down yesterday. German DAX (DE30) fell by 1.86% yesterday, French CAC 40 (FR40) lost 1.41%, Spanish IBEX 35 (ES35) dropped by 1.77%, British FTSE 100 (UK100) closed down by 1.63%.

EUR/USD traded below 1 yesterday for the first time in 20 years after Italian Prime Minister Mario Draghi’s party in the coalition government failed to support a vote of confidence in parliament and announced his resignation. However, the Italian president rejected the resignation. Inflation data will be released today in Italy. Analysts expect to see consumer prices rise by another 1.2%. But many experts are inclined to believe that the euro is not as weak as the dollar is strong due to the difference in interest rates between the US Federal Reserve and the ECB. At the moment, a decline of the EUR/USD quotes to the level of 0.9 is the most probable scenario.

Oil prices remain very volatile. Yesterday oil fell by more than $7 per barrel, but by the end of the session, the oil leveled off the wave of decline and closed at the opening level. Analysts’ opinions diverge. On the one hand, tighter monetary policy on the part of the US and planned release of reserves by the US and its allies put downward pressure on oil quotes. On the other hand, OPEC+ countries are producing much less oil than demand, causing shortages that put upward pressure on prices. Sanctions for Russia are also playing in favor of growth.

Asian markets mostly rose yesterday. Japan’s Nikkei 225 (JP225) gained 0.62%, Hong Kong’s Hang Seng (HK50) decreased by 0.22%, and Australia’s S&P/ASX 200 (AU200) was up 0.44% on the day.

Data released Friday showed that China’s economy contracted sharply in the second quarter. At the same time, annual growth also slowed sharply, highlighting the tremendous loss of activity due to widespread COVID lockouts that shook industrial production and consumer spending. China’s GDP fell by 2.6% in the second quarter compared to the previous quarter. On an annualized basis, GDP rose a modest 0.4% in April-June, missing the 1.0% growth forecast. For the first half of the year, GDP grew by 2.5%, well below the government’s target of about 5.5% for the year.

S&P 500 (F) (US500) 3,790.38 −11.40 (−0.30%)

Dow Jones (US30) 30,630.17 −142.62 (−0.46%)

DAX (DE40) 12,519.66 −236.66 (−1.86%)

FTSE 100 (UK100) 7,039.81 −116.56 (−1.63%)

USD Index 108.66 +0.70 (+0.65%)

• – China GDP (q/q) at 05:00 (GMT+3);
• – China Retail Sales (m/m) at 05:00 (GMT+3);
• – China Industrial Production (m/m) at 05:00 (GMT+3);
• – China Unemployment Rate (m/m) at 05:00 (GMT+3);
• – Eurozone Italian Consumer Price Index (m/m) at 11:00 (GMT+3);
• – Canada Retail Sales (m/m) at 15:30 (GMT+3);
• – US Retail Sales (m/m) at 15:30 (GMT+3);
• – US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By Magalie Masamba, University of Pretoria 

The New Development Bank, which was formed in July 2014, marks its eighth birthday this year. It was formed by the leaders of Brazil, Russia, India, China and South Africa (BRICS) when they met in Fortaleza, Brazil for the bloc’s summit. The bank was seen as a potential alternative to the World Bank and able to take a new approach to development finance.

The New Development Bank has since approved 11 projects in South Africa and Lesotho. These involve sustainable energy, transportation, water resource management, and a COVID-19 emergency loan programme. Some of these projects, for instance the Environmental Protection Project for Medupi Thermal Power Plant, are of strategic importance to South Africa. Of the project’s estimated total cost of US$2.75 billion, the bank is providing a US$480 million loan.

This is in line with hopes that the bank would serve as a much-needed new source of financing for national and regional initiatives. Another hope was that it would be more transparent and accountable than other multilateral banks such as the World Bank. Its mission and values, articles of agreement, environmental and social framework and information disclosure policy make commitments about transparency and openness.

The bank’s mission statement expresses its objective of not only “achieving development goals with transparency” but also displaying “empathy” towards its projects’ intended beneficiaries.

Billions of dollars of investment later, however, the reality suggests that improvement is needed.

A study on transparency and accountability by Oxfam South Africa and the University of Pretoria’s Centre for Human Rights raises concerns about how the bank handles access to information. It also lacks an independent accountability mechanism. The study calls into question whether the bank is showing empathy towards the communities that are affected by its projects.

Too little openness

The study highlights transparency and accountability challenges with some of the projects co-financed by the bank. The researchers interviewed representatives of the communities near the South Africa Lesotho Highlands Water Project Phase II and the Medupi project.

Some of these challenges are cross-cutting. For instance, the representatives said that the influx of migrant workers into their communities had put a strain on resources and services. There were also project-specific issues. These included concerns about the resettlement of more than 3,000 people to make way for the Lesotho project.

The study demonstrates the difficulty of getting project information. The New Development Bank’s responses to information requests from the researchers lacked adequate detail. Without timely and comprehensive access to information, how can communities affected by projects adequately address their concerns?

The bank’s website has no project documents and its information portal is hard to use. This affects the right of communities to be heard, a right that can’t be exercised without access to information.

Unlike most multilateral development banks, the New Development Bank doesn’t have an independent accountability mechanism. Nor does it have other ways for these communities to seek redress or hold it accountable.

Such mechanisms are created to hold development finance institutions and their clients accountable to their own policies. They also provide access to remedies for individuals and communities that are adversely affected by the activities such institutions fund. Without such a mechanism, the bank’s approach to accountability falls far short of global best practice.

It’s clear that much more can be done to improve transparency and accountability at the New Development Bank.

Looking ahead

The bank could do this in several ways:

• It must put section 23 of its environment and social framework into practice. This requires the bank to disclose project documents and information to communities and the general public during the project design and implementation phases, and throughout projects’ life cycles.
• It should create a structure or platform, an independent accountability mechanism, that affected communities can use to prod the bank when it fails to provide timely access to project information or to comply with its own policies and procedures. Better and more sustainable development outcomes can be achieved when the mechanism’s design process includes public consultations that incorporate different stakeholders. These public consultations should aim to genuinely solicit inputs that influence the design and implementation of the proposed mechanism.

• At a national level, there have also been calls for the formation of a South African liaison group for international financial institutions. This group would be a platform to promote discourse between South African government institutions such as the treasury and civil society concerning the country’s relationship with international financial institutions. This group could for instance be a good platform to discuss civil society’s concerns about the New Development Bank.

About the Author:

Magalie Masamba, Post-doctoral Fellow, Centre for Human Rights, University of Pretoria

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Gary Samore, Brandeis University 

Iran’s nuclear program is a major topic in President Joe Biden’s meetings this week with leaders in the Middle East. The most challenging part of producing nuclear weapons is making the material that fuels them, and Iran is known to have produced uranium that is near-weapons grade.

The Conversation asked Brandeis University professor Gary Samore, who worked on nuclear arms control and nonproliferation in the U.S. government for over 20 years, to explain why uranium enrichment is central to Iran’s nuclear ambitions and where the Iranian effort stands now.

A cascade of gas centrifuges at a U.S. enrichment plant in Piketon, Ohio, in 1984. Iran is using similar technology to enrich uranium.
U.S. Department of Energy

What does it mean to enrich uranium?

Natural uranium contains two main isotopes, or forms whose atoms contain the same number of protons but different numbers of neutrons. It’s about 99.3% uranium-238 and 0.7% uranium-235. The uranium-235 isotope can be used to generate nuclear power for peaceful purposes, or nuclear explosives for military purposes.

Enrichment is the process of separating out and increasing the concentration of U-235 to higher levels above natural uranium. Generally speaking, lower levels of enriched uranium, such as uranium with 5% U-235, are commonly used for nuclear reactor fuel. Higher levels of enrichment, such as 90% U-235, are most desirable for nuclear weapons.

For military purposes, why are higher levels of enrichment important?

The higher the level of enrichment, the smaller the amount of nuclear material necessary to produce a nuclear weapon.

The International Atomic Energy Agency identifies 25 kilograms (55 pounds) of 90% enriched uranium as a “significant quantity” necessary for a simple nuclear weapon. But larger amounts of lower-enriched uranium can also work.

For example, the “Little Boy” atomic bomb that the U.S. dropped on Hiroshima, Japan, in 1945 used about 64 kilograms of uranium (141 pounds) enriched to an average of 80% U-235.

From a nuclear weapons design standpoint, smaller amounts of higher-enriched nuclear material are more desirable because that reduces the size and weight of the nuclear weapon and makes it easier to deliver. As a result, modern nuclear weapons based on uranium typically use uranium enriched to 90% to 93% U-235, which is known as weapons-grade uranium, for the primary fuel.

What had Iran achieved prior to the 2015 nuclear deal?

The 2015 nuclear deal between Iran, the U.S. China, France, the United Kingdom, Russia and Germany put significant restrictions on Iran’s nuclear program, in return for relief from a number of international sanctions. When the deal was adopted, Iran had mastered the basic technology for enriching uranium with gas centrifuges – cylinders that spin uranium in gas form at very high speeds to separate the heavier U-238 isotope from the lighter U-235 isotope.

At its two principal enrichment facilities, Natanz and Fordow, Iran was operating about 18,000 first-generation IR-1 centrifuges and about 1,000 second-generation IR-2 centrifuges. It had also accumulated a stockpile of roughly 7,000 kilograms (about 15,430 pounds) of low-enriched uranium (under 5%) and about 200 kilograms (440 pounds) of 20% enrichment uranium.

Based on these capabilities, Iran’s “breakout time” to produce about 25 kilograms (55 pounds) of 90% enriched uranium – enough for a single nuclear weapon – was estimated to be one or two months.

Breakout time is not intended to suggest that Iran would necessarily decide to produce weapons-grade uranium at these inspected facilities, because the risk of detection and of potential negative international reaction is very high.

How did the nuclear deal constrain Iran’s activities?

The 2015 nuclear deal put physical constraints on Iran’s enrichment program for 10 to 15 years, including the number and type of centrifuges Iran could operate, the size of its stockpile of low-enriched uranium and its maximum enrichment level.

For 15 years, no enrichment would take place at Fordow, and Iran’s stockpile of low-enriched uranium would be limited to 300 kilograms (660 pounds) at a maximum enrichment level of 3.67%. And for 10 years, its centrifuges would be limited to about 6,000 IR-1 centrifuges at Natanz.

In order to meet these physical limits, Iran shipped out to Russia most of its stockpile of low-enriched uranium and its entire stockpile of 20% enriched uranium. It also dismantled for storage inside Iran most of its IR-1 centrifuges and all of its more advanced IR-2 centrifuges. As a consequence of these limits, Iran’s “breakout time” was extended from a month or two before the deal to about one year after the deal.

After year 10 of the deal, however, Iran was allowed to start replacing its IR-1 centrifuges at Natanz with more advanced models, which it was permitted to continue to research and develop during the first decade of the deal. As these more powerful advanced centrifuges were installed, breakout time would probably have shrunk to about a few months by year 15 of the deal.

As part of the deal, Iran also agreed to enhanced international inspections and monitoring of its nuclear facilities.

What has Iran done since President Trump withdrew the U.S. from the nuclear deal in 2018?

Since the U.S. withdrew from the nuclear deal, Iran has gradually exceeded the agreement’s limits. It has increased its stockpile of 5% enriched uranium; resumed producing 20% enriched uranium; initiated production of 60% enriched uranium, resumed enrichment at Fordow; and manufactured and installed advanced centrifuges at both Natanz and Fordow.

Iran has also begun to restrict international monitoring of its nuclear facilities. In June 2022, for example, Iran announced that it was disconnecting cameras installed under the 2015 nuclear deal to monitor its nuclear facilities.

As of May 2022, the International Atomic Energy Agency estimated that Iran had about 1,000 kilograms (2,200 pounds) of 5% enriched uranium, about 240 kilograms (530 pounds) of 20% enriched uranium and 40 kilograms (88 pounds) of 60% enriched uranium.

As a result of this growing stockpile of enriched uranium and the use of advanced centrifuges, Iran’s estimated breakout time has been reduced to a few weeks. So far, however, Iran has not decided to begin production of weapons-grade (90%) enriched uranium, even though it is technically capable of doing so.

Most likely, Iran is behaving cautiously because its leaders are concerned that producing weapons-grade uranium would trigger a strong international reaction, which could range from additional sanctions to military attack.

About the Author:

Gary Samore, Professor of the Practice of Politics and Crown Family Director of the Crown Center for Middle East Studies, Brandeis University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By JustForex

Stock indices reacted to the news on US inflation data with a sharp drop. By the close of the Stock Exchange, Dow Jones Index (US30) decreased by 0.67%, while S&P 500 (US500) fell by 0.45%. The Technology Index NASDAQ (US100) lost 0.15% yesterday. At the end of the day, all three indices were down. The gap in the yield curve inversion between 2-year and 10-year bonds reached 25 points yesterday, which also is negative for the stock market and the economy.

The US inflation has significantly beaten analysts’ expectations. The US consumer price level reached 9.1% in annual terms, compared to expectations of 8.8%. It is the highest rate since 1981. Last month’s gain was 1.3%. The Core Index (which excludes food and energy prices) reached 5.9% y/y, with 5.7% expected. Monthly, the core CPI rose by 0.7%. Such data took a big hit to confidence in the pace of slowing inflation going forward. At the moment, interest rate hikes from the Fed are not giving results, but it is worth realizing that the effect of a rate hike comes with a time lag. Much of the rise in inflation was driven by gasoline prices, which rose 11.2% MoM. Electricity increased by 0.7%, and health care costs also went up by 0.7%. Meanwhile, the White House website released a statement from Joe Biden indicating that the inflation data did not reflect the full impact of the 30-day decline in gas prices, which has seen fuel prices fall by about 40 cents since mid-June. Atlanta Fed President Rafael Bostic said Wednesday that higher-than-expected inflation in June could require policymakers to consider a 100 basis point hike at the next meeting.

Investors are now worried that the Fed may revise its plans to raise rates by 100 basis points at once, as the Bank of Canada did yesterday, which also surprised traders. The Bank of Canada said in a statement that inflation in Canada remains more resilient than the Bank expected in its April monetary policy report and is likely to stay around 8% for the next few months. While global factors such as the war in Ukraine and ongoing supply disruptions have been major drivers, pressure on domestic prices due to excess demand is becoming more prominent. More than half of the components that make up the CPI have increased by more than 5%. With this expansion in price pressures, the Bank’s core inflation indicators have increased. The Bank expects the Canadian economy to grow 3.5% in 2022, 1.75% in 2023, and 2.5% in 2024. Economic activity is slowing as global growth slows and monetary policy tightens. The July forecast suggests that inflation will begin to decline later this year, dropping to about 3% by the end of next year and returning to the 2% target by the end of 2024. Global energy prices are also projected to decline.

Equity markets in Europe mostly fell yesterday. German DAX (DE30) decreased by 1.16%, French CAC 40 (FR40) fell by 0.73%, Spanish IBEX 35 (ES35) lost 0.87%, and British FTSE 100 (UK100) closed down by 0.74%.

European countries also saw an increase in consumer prices. Over the last month, the inflation rate in Germany rose by 0.1%, in France, the CPI increased by 0.7%, and in Spain, inflation jumped by 1.5% to 10.2% on an annualized basis. The European currency continues to suffer as the region faces an energy crisis caused by sanctions imposed on Russia over its invasion of Ukraine. The European Central Bank faces a dilemma: let the euro fall further, spurring already record-high inflation, or fight back by raising interest rates more quickly, adding to the damage to an economy already suffering heavily from high energy prices.

Oil prices increased for the first time in three days but remained below $100 a barrel. US government data showed the largest weekly oil inventories since the beginning of the year. Given the growth in stocks and at the expense of aggressive interest rate hikes by global banks, analysts predict a decline in oil prices in the coming months.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) added 0.54%, Hong Kong’s Hang Seng (HK50) decreased by 0.22%, and Australia’s S&P/ASX 200 (AU200) was up by 0.23% on the day.

China’s exports rose by 17.9% in June from a year earlier, beating analysts’ expectations as the economy tries to regain lost momentum due to extensive COVID blockages and supply chain problems, while imports increased by 1.0%, data showed Wednesday.

Australia’s unemployment rate fell from 3.8% to 3.5%, with the number of unemployed falling by 54.3 thousand. A strong labor market with high inflation gives the central bank room to raise interest rates more aggressively.

S&P 500 (F) (US500) 3,801.78 −17.02 (−0.45%)

Dow Jones (US30) 30,772.79 −208.54 (−0.67%)

DAX (DE40) 12,756.32 −149.16 (−1.16%)

FTSE 100 (UK100) 7,156.37 −53.49 (−0.74%)

USD Index 107.99 −0.08 (−0.08%)

• – Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
• – Japan Industrial Production (m/m) at 07:30 (GMT+3);
• – Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Producer Price Index (m/m) at 15:30 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US FOMC Member Waller Speaks at 18:00 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By George Prior

As U.S. inflation sets a fresh 40-year high, investors should capitalize on likely panic-selling, says the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The bullish message from deVere Group’s Nigel Green comes as inflation in the U.S., measured by the Consumer Price Index (CPI), soared to its highest level in four decades at 9.1% on a yearly basis in June from 8.6% in May, according to the data published by the U.S. Bureau of Labor Statistics on Wednesday.

He notes: “This figure came in higher than the market expectation of 8.8%.

“The headline-grabbing 9.1% is likely to send markets into a temporary tailspin as it will fuel investors’ fears about an aggressive tightening response from the Federal Reserve.

“Many will be jittery about a potential rate move of 100bps at the end of this month by the U.S. central bank.”

The deVere CEO continues: “Despite the noise, I would urge investors to maintain perspective.

“They should remember that this is backward-looking and puts in the spotlight high gas prices from June that are now coming down, along with many other prices that have also seen a drop since then.”

Should investors manage to maintain a “legitimate sense of perspective,” says Nigel Green, this could be a good time to top-up portfolios.

“As markets continue to be unsteady in the near-term, investors will be using the downturn to their financial advantage by topping-up their portfolios with quality stocks at lower prices.

“The panic-selling will create some important long-term opportunities with high upside potential and low risk possibilities for those who buy judiciously.

“Whilst you may be tempted to stash cash during periods of volatility, experience demonstrates that such attempts to ‘time the market’ almost always fail.

“You should resist complacency, be active, revise and adjust with an adviser to build a resilient and dynamic portfolio, perhaps with some less-traditional, return-enhancing assets.”

Nigel Green concludes: “This is an ideal time to seriously build your wealth by remaining fully and wisely invested and growing your investment portfolios.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By JustForex

Уesterday, the yield curve for 2- and 10-year bonds approached the close since 2007, with the curve remaining inverted. The widening spread between 2-year and 10-year bonds signals a clear recession warning. “But Q2 results for banks should be solid, as it is too early for banks to make meaningful provisions for potential credit losses in the event of a potential U.S. recession,” Deutsche Bank said in a report.

The Dow Jones index (US30) decreased by 0.62%, and the S&P 500 index (US500) lost 0.92% at the close of trading on Tuesday. The Technology Index NASDAQ (US100) fell by 0.95% yesterday. At the end of the day, all three indices were down.

Citigroup Inc expects the benchmark S&P 500 index (US500) to end the year at 4200 points, below the forecast made by the bank in late June (4700) and well above where it is now. Oppenheimer&Co. remains optimistic about the benchmark index, though last week, it lowered its target price from its previous forecast of 5330 points to 4800. Credit Suisse Group analysts revised their forecast for the S&P 500 Index (US500) to 4300 points at the end of the year. Morgan Stanley strategists expect the S&P 500 (US500) to reach its target of 3400-3500 points in the absence of a confirmed recession. However, if the economy does end up in a recession, the index could fall as low as 3000 points later this year.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 0.57% on Tuesday, France’s CAC 40 (FR 40) jumped by 0.80%, Spain’s IBEX 35 (ES35) fell by 0.62%, and the British FTSE 100 (UK100) closed up by 0.18% yesterday.

The euro’s slide towards parity against the dollar was caused by a complex of problems: a different approach of the European Central Bank and the Federal Reserve System, the threat of a serious recession in Europe, and geopolitical uncertainty. Investors will have to reassess the EU’s economic prospects if Russia decides to limit gas supplies to the continent. A potential “dovish” reassessment of expectations on ECB rates could further increase the divergence of Treasury bond yields and other sovereign bonds. It could result in EUR/USD falling well below 1.

Oil fell to a three-month low as fears of a global recession escalated. The Organization of the Petroleum Exporting Countries (OPEC) noted new demand concerns, predicting that oil demand will grow slower in 2023. A rise in infections in China and approaching US inflation data are raising concerns about demand. West Texas Intermediate crude oil lost more than 8% and closed below $96 a barrel for the first time since early April. Money managers became more bearish on the major oil benchmarks, cutting their net long positions last week to their lowest level since 2020. The US lowered its forecast for oil production growth through 2023, citing inflation and labor shortages. Meanwhile, the White House on Monday urged OPEC to produce more oil, saying it believes the group of oil exporters can do so.

Gold prices continue to decline. Gold and silver prices are inversely correlated with the US Dollar Index and US government bond yields. Amid tighter monetary policy, the US Dollar Index is rising along with government bond yields, resulting in selling pressure on gold and silver prices. Many traders think gold is the best hedge against high inflation, but that doesn’t work in current market conditions.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.77%, Hong Kong’s Hang Seng (HK50) lost 1.32%, and Australia’s S&P/ASX 200 (AU200) was up by 0.06% for the day.

The Central Bank of New Zealand raised its interest rate by 50 basis points to 2.5%. It is the sixth rate increase in a row. At the same time, the RBNZ made it clear that it is still happy with its planned aggressive tightening course. The RBNZ currently plans to raise the rate to 3.5% by the end of this year and to reach 4% by mid-2023.

South Korea’s Central Bank hiked its benchmark interest rate by half a percent to 2.25% on Wednesday, seeking to cut inflation from a 24-year high and balancing fears of a sharp economic slowdown amid falling business activity.

S&P 500 (F) (US500) 3,818.80 −35.63 (−0.92%)

Dow Jones (US30) 30,981.33 −192.51 (−0.62%)

DAX (DE40) 12,905.48 +73.04 (+0.57%)

FTSE 100 (UK100) 7,209.86 +13.27 (+0.18%)

USD Index 108.12 +0.10 (+0.09%)

• – New Zealand RBNZ Interest Rate Decision at 05:00 (GMT+3);
• – New Zealand RBNZ Rate Statement at 05:00 (GMT+3);
• – UK GDP (m/m) at 09:00 (GMT+3);
• – UK Industrial Production (m/m) at 09:00 (GMT+3);
• – UK Manufacturing Production (m/m) at 09:00 (GMT+3);
• – Eurozone German Consumer Price Index (m/m) at 09:00 (GMT+3);
• – Eurozone French Consumer Price Index (m/m) at 09:45 (GMT+3);
• – Eurozone Spanish Consumer Price Index (m/m) at 10:00 (GMT+3);
• – Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
• – US Consumer Price Index (m/m) at 15:30 (GMT+3);
• – Canada BoC Interest Rate Decision at 17:00 (GMT+3);
• – Canada BoC Monetary Policy Report at 17:00 (GMT+3);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• – Canada BoC Press Conference at 18:00 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.