2022/04/18 (027) Column

Little change – investors cautious, on eastern monday
USD/YEN hits near 20-Year-High while todays trading session,
while Oil market price action traded more or less around 114 USD.


Disappointment with China’s central bank persists

The main Asian and Pacific stock markets that were open on Monday closed with losses. There was no trading on the Hong Kong and Sydney markets. According to experts, investors are still disappointed that the Chinese central bank surprisingly decided against lowering a key interest rate on Friday. Many economists had expected such a step to strengthen the economy paralyzed by the corona lockdowns. This seems to outweigh China’s surprisingly strong growth in the first quarter.

The CSI 300 index of the top 300 mainland China companies fell 0.53 percent to 4166.38 points. The Japanese Nikkei 225 closed 1.08 percent lower at 26,799.17 points.

Russia’s central bank plans to ease foreign exchange restrictions

Russia’s central bank governor Elvira Nabiullina has pledged further easing of foreign exchange controls. “We cannot do without all elements of foreign exchange control in the near future. But the control must be balanced in such a way that it covers all risks, but does not affect normal foreign trade activity,” Nabiullina said on Monday at a hearing in the Russian parliament, the State Duma.

After the war of aggression against Ukraine ordered by Kremlin chief Vladimir Putin on February 24, the West imposed tough sanctions on Russia, which are aimed at the financial sector, among other things. Among other things, the currency reserves of the Russian central bank stored abroad were frozen. According to Nabiullina, the central bank can only access around half of its gold and foreign exchange reserves. The 58-year-old explained that the sanctions had primarily hit the financial market, but are now increasingly affecting the Russian economy.

In order to stabilize its own financial sector and the ruble, the central bank imposed a ban on the sale of foreign currencies. It also obliged exporters to exchange 80 percent of their foreign exchange earnings in Russia at the fixed central bank exchange rate.

The first restrictions have now been lifted: Russian banks have been allowed to sell dollars and euros to citizens again since Monday. The commission for currency transactions on the stock exchange was also canceled again. According to Nabiullina, the next step could be to relax the foreign exchange tax regulations for exporters, “including non-commodity exports”.

Little change – investors cautious The most important US stock indices ended trading on Monday after the long Easter weekend with little change. The indices repeatedly crossed the zero line – sometimes from above and sometimes from below. Finally, the Dow Jones Industrial dropped 0.11 percent to 34,411.69 points. The broader S&P 500 lost 0.02 percent to 4391.69 points. The tech-heavy Nasdaq 100, on the other hand, rose 0.13 percent to 13,910.76 points. Investors continued to act cautiously, experts said. China’s first-quarter data released that day were described by the market as mixed. In addition, to the surprise of experts, the Beijing central bank decided not to lower the key interest rate to stimulate the domestic economy on Friday. In the US, there was little news from the economic and corporate world. In Europe, the Easter break ends on Tuesday. The trading volume in New York was correspondingly below average.

Japanese Yen Hits Near 20-year Low

The Japanese yen depreciated past 126 per dollar in mid-April, hitting its lowest in nearly 20 years, as the Bank of Japan so far resisted the global shift towards tighter monetary policy. The BOJ has also repeatedly intervened to keep benchmark bond yields around zero. Meanwhile, Japanese Finance Minister Shunichi Suzuki declined to comment on specific prices in foreign exchange markets but said that the government was closely watching the yen and that excess volatility and disorderly movements could hurt the economy and financial stability. However, he previously nixed expectations of government intervention in the currency markets, saying the central bank does not target foreign exchange rates.

Brent Crude Trades Around $114

Brent crude futures were trading around $114 a barrel on Monday, a level not seen in three weeks, as investors weigh prospects of slowing demand from China and supply risks from Russia’s invasion of Ukraine. Fresh economic data showed the Chinese economy slowed sharply in March due to coronavirus wave and lockdowns, and the country refined 2% less oil than a year earlier. Meanwhile, tensions in Ukraine grew over the weekend, prompting concerns of further sanctions on Russia, with the EU possibly phasing in a ban on Russian oil imports. Adding to the pressure, Libya reportedly halted operations at its El Feel oilfield and Zuteina oil port on Sunday after protesters took over the sites.