InvestMacro

by JustForex

US stock indices ended Wednesday’s trading with solid growth. Falling prices for oil and other commodities have supported the US stock market. The sharp rise in oil and other commodities has raised fears among investors about further rising inflation and a potential slowdown in economic growth. As the stock market closed yesterday, the Dow Jones index (US30) increased by 2%, the S&P 500 index (US500) added 2.57%, and the NASDAQ technology index (US100) jumped by 3.59%.

The US consumer inflation data will be released today, which could significantly shake the dollar as analysts expect another acceleration of US inflation. If the actual value is worse than expected, the dollar index may strengthen sharply. The Fed is expected to decide to raise interest rates more aggressively next week, although Fed Chairman Jerome Powell said last week that the increase would be 25 basis points. If the actual value is better than expected or meets expectations, the dollar index, on the other hand, may fall, which will have a positive impact on major US stock indices.

Amazon has announced its first share split since the dot-com boom, announcing to investors on Wednesday that they will receive 20 shares for every share (20:1) they currently own. The company’s stock jumped 8% in the after-hours session. The company also said that its board of directors has decided to make a buyback up to $10 billion.

European indices strengthened substantially yesterday, showing the largest growth in two years. Several factors contributed to this. Firstly, investors were attracted by Ukrainian President Volodymyr Zelensky’s interview for the American ABC News, in which he said that he “cooled down” about Ukraine’s accession to NATO and added that he was open to a dialogue on the future of the “DNR” and “LNR.” Secondly, the foreign ministers of Ukraine and Russia will meet in Turkey today. Thirdly, the United Arab Emirates, a member of the Organization of Petroleum Exporting Countries and their allies (OPEC+), supports increasing oil production. All these factors caused a positive mood.

At the closing of the stock exchange, German DAX (DE30) gained 7.92%, French CAC 40 (FR40) added 7.13%, Spanish IBEX 35 (ES35) increased by 4.88%, British FTSE 100 (UK100) jumped by 3.25%. Today, the ECB will hold its monetary policy meeting to decide the interest rate. Analysts believe that amid the war in Ukraine, the ECB will not change anything in monetary policy. Still, investors should closely follow Christine Lagarde’s speech hints at a press conference.

After it became known yesterday that the United Arab Emirates would support an increase in oil production amid possible supply problems from Russia, oil prices fell the most in almost two years.

On Thursday, Asian stocks rose, following rising on Wall Street, as planned diplomatic talks between Russia and Ukraine have supported investor sentiment. Japan’s Nikkei 225 (JP225) gained 3.94%, Hong Kong’s Hang Seng (HK50) added 1.27%, and Australia’s S&P/ASX 200 (AU200) rose 1.10%. Japan’s Producer Price Index, which measures inflation between factories, rose to 9.3% from 8.9% in annual terms. This is the first sign that consumer inflation will also begin to increase.

Main market quotes:

S&P 500 (F) (US500) 4,277.88 +107.18 (+2.57%)

Dow Jones (US30) 33,286.25 +653.61 (+2.00%)

DAX (DE40) 13,847.93 +1,016.42 (+7.92%)

FTSE 100 (UK100) 7,190.72 +226.61 (+3.25%)

USD Index 97.98 -1.08 (-1.09%)

• – Japan Producer Price Index (m/m) at 01:50 (GMT+2);
• – Eurozone ECB Monetary Policy Statement at 14:45 (GMT+2);
• – Eurozone ECB Interest Rate Decision at 14:45 (GMT+2);
• – Eurozone ECB Press Conference at 15:30 (GMT+2);
• – US Consumer Price Index (m/m) at 15:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2).

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 Orbex

Up until about two weeks ago, there was a pretty strong consensus that the ECB would take the first step towards monetary policy normalization at tomorrow’s meeting.

That’s when the covid asset-buying program (PEPP) would run out. There was a recession of covid cases, and lifting of lockdowns. In fact, the comments from members, and the minutes of the last meeting seemed to reinforce that.

But, that all came to a screeching halt when Russian tanks rolled into Ukraine.

There is massive uncertainty in Europe as to how the war will play out, and how it will affect the economy. Although sanctions are targeting Russia, they will inevitably have an impact on the countries imposing the sanctions. Then there are the unexpected consequences of a war in one of the most resource-rich areas of the world, with fuel and commodity prices soaring.

Inflation is an even bigger problem

The ECB’s turn towards hawkishness was obvious because of rising inflation in the shared economy. Forecasts from the ECB itself show that it could continue increasing. That was before the price of fuel started rocketing to the moon. Then there is the economic disruption from increased spending to help accommodate millions of refugees.

So, why not be even more hawkish? Because the risk associated with the war and its economic fallout leads to lower growth expectations.

Germany already reported one quarter of negative growth. This means that it could already be in a technical recession. Running off asset purchases and threatening to raise rates might help with inflation. But it would come at the cost of pushing a reeling economy even further down.

Get familiar with stagflation

High inflation but lack of economic growth is known as stagflation. And it is a problem for central banks because it’s hard to break out from.

This was the case in the 1970s in the US, which prompted then Fed Chairman Volker to raise rates dramatically, leading to a recession, but ultimately breaking the cycle. That really isn’t a possibility for a fractured economy with most countries holding around 100% of their GDP in debt.

Furthermore, the underlying causes of stagflation might be completely out of the ECB’s hands. It’s not monetary policy that is driving problems to the supply chains, nor directing the war in Ukraine.

What can the ECB do?

The consensus is that the ECB will simply change some names. The PEPP program buying €20B a month is coming to an end, but the normal asset purchasing facility should rise by €20B. So, the ECB will continue to buy the same monetary policy support.

In the meantime, the ECB can hold off on giving any clues as to when the program will end, by saying something along the lines of “as long as the situation merits”. Another potential option would be to announce a “taper”, reducing the amount purchased by a fixed figure, but subject it to review each month. That could be a way to add a little bit of hawkishness.

However, that is unlikely.

Finally, the staff projections were complete before the start of the war, so the market will probably dismiss them.

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Article by Orbex

Orbex is a fully licensed broker that was established in 2011. Founded with a mission to serve its traders responsibly and provides traders with access to the world’s largest and most liquid financial markets. www.orbex.com

Why you can’t rely on the FDIC if another financial crisis hits and your bank goes under

By Elliott Wave International

Millions of U.S. bank depositors feel safe in the knowledge that the Federal Deposit Insurance Corporation will protect their accounts, even if their bank goes under.

Yes, it’s true that the FDIC says it will do so. As their website states:

The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

However, the question is: Does the FDIC have the wherewithal to fulfill its promise?

In the event of a major financial crisis, the answer is “no.” Not even close.

The Elliott Wave Theorist is a monthly publication which provides analysis of financial markets and social trends and here’s what the Theorist said in August 2008, near the middle of the 2007-2009 financial crisis:

The FDIC is not funded well enough to bail out even a handful of the biggest banks in America. It has enough money to pay depositors of about three big banks. After that, it’s broke.

No doubt, most bank depositors would be shocked to learn this.

But think about it: No single entity could possibly insure all of the nation’s bank deposits.

Yet, that FDIC sticker on the front of your bank is very reassuring. The discussions with your banker about your deposit “insurance” might be reassuring.

But, something that is not quite so reassuring is from none other than a former vice-chairman of the FDIC itself. Here’s what Thomas Hoenig wrote for the Los Angeles Times in a Dec. 18, 2014 article titled, “FDIC couldn’t cover a big bank bailout without taxpayer support”:

As a reminder, when the financial industry imploded in 2008, Congress had to pass a special law to fund a $700-billion bailout … . The Federal Deposit Insurance Corp. had nowhere near enough resources to fund their resolution. [emphasis added]

Here’s another insight from the new March Elliott Wave Theorist:

Did you know that most of the FDIC’s money comes from other banks? This funding scheme makes prudent banks pay to save the imprudent ones, imparting weaker banks’ frailty to the stronger ones.

The best way to protect your deposits is to adequately research the banks in your community and pick one where the banks’ officers handle their customers’ deposits prudently.

The new March Elliott Wave Theorist elaborates on safe banking in the U.S. as well as worldwide and admonishes readers to “act while you can.”

Why?

Well, the next financial downturn may be severe enough to put many banks at risk of collapse.

This can happen quickly. Just recall the speed with which the global financial system found itself on the brink of a so-called “financial Armageddon” back in 2008.

Here in 2022, the new Theorist describes “four conditions in place at many banks that pose a danger” and one of them is exposure to leveraged “derivatives” — a word the world became familiar with during the 2007-2009 financial crisis.

But, getting back to protecting your deposits, there are other steps you may want to consider taking beyond doing research on the banks in your community.

Indeed, the new Theorist mentions “a special offshore bank” and says it “appears to be one of the safest in the world.”

Safe banking is a timely topic because the Elliott wave model strongly suggests that the next financial downturn may arrive a lot sooner than many market and economic observers expect.

If you’d like to learn how the Elliott wave model can help you to anticipate financial change, you are encouraged to read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior.

Here’s a quote from the book:

Without Elliott, there appear to be an infinite number of possibilities for market action. What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths. Elliott’s highly specific rules reduce the number of valid alternatives to a minimum.

You may be interested in knowing that you can read the entire online version of this definitive text on the Elliott wave model for free!

The only requirement for free access is a Club EWI membership, which is also free. In case you’re unfamiliar with Club EWI, there are close to 500,000 worldwide members and all of them have free access to a wealth of Club EWI resources on investing and trading – without any obligations. That’s the benefit of a Club EWI membership.

Hop on the Club EWI bandwagon now by following this link: Elliott Wave Principle: Key to Market Behavior – free and unlimited access.