2022/04/19 (028) Column

Confidence in the US economy gives prices a strong boost
Oil market prices eased Tuesday after recent gains
Stocks in Turkey Hit All-Time High


Confidence in the US economy gives prices a strong boost

Investors on the New York stock market presented themselves in high spirits on Tuesday. They trust in a strong US economy. Concerns about a quick tightening of domestic monetary policy – fueled again by statements by St. Louis Federal Reserve Chairman James Bullard, who suggested a possible 0.75 percentage point hike in US interest rates – dampened the good mood not. Positive signals came from the US construction industry, which developed better than expected in March despite rising real estate interest rates.

At the close of trading, the leading index Dow Jones Industrial gained 1.45 percent to 34,911.20 points. The broader S&P 500 rose 1.61 percent to 4462.21 points. The tech-heavy Nasdaq 100 was in even better shape, up 2.15 percent to 14,210.26 points.

“The past few months have been tumultuous for stock markets,” wrote broker Oanda analyst Craig Erlam, referring to high inflation, the prospect of faster rate hikes, slower growth and the ongoing war in Ukraine. But in the first phase of the reporting season, the stock markets – and here again the stock exchanges in the USA – once again showed their robust side.

JPMorgan strategist Marko Kolanovic also believes that the mood and positioning of market participants on the stock market is now too pessimistic and tends to remain “constructive” for stocks. A rally is possible in the short term.

Oil prices eased Tuesday after recent gains

At midday, a barrel (159 liters) of North Sea Brent cost US$ 111.25. That was $1.91 less than the day before. The price of a barrel of West Texas Intermediate (WTI) fell $2.03 to $106.18.

Oil prices rose noticeably over Easter. Commerzbank expert Carsten Fritsch refers to the lower supply of crude oil. Oil production in April was significantly lower than in the previous month. In addition, there were delivery failures in Libya. In the face of demonstrations against the prime minister, the Sharara oil field had to be closed. It is feared that the country’s oil production will fall even further.

A counter-movement began on Tuesday. Because there are also signs of weakening demand. The focus here is on the important consumer country China. After a strong start to the year, China’s economy has clearly lost momentum. The lockdowns and other restrictions imposed by the strict zero-Covid strategy are noticeably slowing down the second largest economy. Now supportive economic measures could become necessary.In addition, the International Monetary Fund (IMF) is likely to be more pessimistic about the future in its spring forecast for the global economy. In view of the Russian war of aggression in Ukraine, a lowering of the forecast is to be expected, as IMF boss Kristalina Georgiewa explained in advance.

Gold Hits One-Week Low

Gold prices tumbled to as low as $1,951 an ounce on Tuesday, a level not seen in a week, as a strong dollar and soaring Treasury yields spooked investors away from the non-yielding metal. Still, the global outlook remained clouded by the Russia-Ukraine war, which showed no signs of de-escalation, while rising inflation continued to boost gold’s appeal as an inflation hedge. Gold climbed above $2,000 an ounce in March, approaching an all-time high of $2,075 touched in August 2020 on safe-haven demand stemming from Russia’s invasion of Ukraine.

Chinese Yuan Hits 5-week Low

The offshore yuan weakened past 6.40 against the dollar on Tuesday, a level not seen since October 2021, as prospects of aggressive loosening by China’s central bank spooked investors. The Chinese monetary policy cycle came in stark contrast to expectations in the US for more aggressive tightening expected from the Federal Reserve, which has buoyed the greenback. Given the above, the 10-year spread between Chinese and benchmark US yields continued to narrow, with the 10-year Treasury yield almost ten basis points higher than its Chinese equivalent.
Stocks in Turkey Hit All-Time High The Borsa Istanbul 100 index extended its momentum to reach an all-time high of 2,529 on Tuesday, predominantly lifted by the financial sector amid a steep rally in recent weeks as investors continue to weigh on Turkey’s precarious economic scenario. The index surged over 36% since the start of Russia’s invasion of Ukraine, with investors using equity to hedge against Turkey’s already surging inflation. Inflation in Turkey jumped to 61.14% in March, the highest in 20 years, underpinned by 500bps of unorthodox interest rate cuts and costly measures to stabilize the lira by the country’s central bank amid strong pressure by President Tayyip Erdogan.