InvestMacro

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.