2022/04/25 (032) Column

Dow turns positive – hope for good tech numbers
European Stocks End Sharply Lower, DAX at 6-Week Low
Gold Approaches 2-Month Low & Oil Sinks 6% on Demand Fears,
while GBPUSD Weakens to 19-Month Low on mondays trading session.


Dow turns positive – hope for good tech numbers

The US stock markets turned their initially significant price losses into gains during trading on Monday. Traders justified the rebound with growing optimism that some of the big US tech companies’ upcoming quarterly earnings releases this week will be good. Interest rate and economic fears still dominated early trading. The news that Twitter had given up resistance to a takeover by tech billionaire Elon Musk caused a stir in late business.

The leading index, the Dow Jones Industrial, lost more than 3.5 percent at times in the first half of the session before it struggled vigorously and turned positive. Ultimately, the leading US index gained 0.70 percent to 34,049.46 points. The market-wide S&P 500 closed up 0.57 percent at 4296.12 points. The tech-heavy Nasdaq 100 rose 1.32 percent to 13,533.22 points.

European Stocks End Sharply Lower, DAX at 6-Week Low

European equity markets closed sharply lower on Monday, with Germany’s DAX down more than 1.5% to its lowest since mid-March as fears about faltering economic growth, a looming tightening cycle of monetary policy, and a deterioration in the pandemic situation in China more than offset relief from Macron’s strong victory in the French presidential elections. China-exposed sectors were among the worst performers and oil and gas stocks tracked the decline in crude prices. On the earnings front, Dutch health technology firm Philips said Q1 core profits fell roughly 30% from the previous year, partly reflecting a recall of a large number of its ventilators, while Swiss pharma Roche posted a better-than-expected 10% increase in Q1 sales on strong demand for antigen COVID-19 tests. On the data front, German business morale unexpectedly improved in April.

Gold Approaches 2-Month Low

Gold declined more than 1.5% to below $1,900 an ounce on Monday, closing in on its lowest level in two months, as the prospect of faster Federal Reserve policy tightening continued to support the dollar and US Treasury yields, while denting demand for bullion. Speaking at a panel hosted by the IMF last week, Fed Chair Jerome Powell said a 50-basis point interest rate increase was “on the table” for May and reiterated that Fed officials were committed to “front-end loading” inflation-fighting efforts. The dollar index hit fresh 2-year highs following the remarks, while the benchmark 10-year US yields held near 3-year highs. Meanwhile,investors remained cautious of geopolitical uncertainties and the risk of stagflation, which may drive safe-haven demand and support gold prices.

Oil Sinks 6% on Demand Fears

WTI crude futures tumbled more than 6% to below $96 per barrel on Monday, extending a 5% decline from last week and hitting their lowest in nearly 2 weeks, amid mounting concerns that prolonged Covid lockdowns in China and rapid rate hikes in the US would weigh on global economic growth and fuel demand. China’s demand for gasoline, diesel and aviation fuel in April is expected to decline 20% YoY, Bloomberg reported, which is equivalent to a drop in crude oil consumption of about 1.2 million barrels a day. In the US, Federal Reserve Chair Jerome Powell indicated that a half-point interest rate increase “will be on the table” when the Fed meets in May to approve the next in what is expected to be a series of rate hikes this year. Meanwhile, investors remained cautious as the worsening crisis in Ukraine could pressure the EU to sanction Russian oil and spur another rally.

Sterling Weakens to 19-Month Low

The British pound depreciated further to below $1.275, the lowest since September 2020 weighed down by poor economic data and less hawkish Bank of England expectations. British retail sales volumes tumbled 1.4% from a month earlier in March, much worse than market expectations of a 0.3% decrease. Also, PMI data signaled a marked cooling in the pace of UK economic growth during April with service providers experiencing a considerable loss of momentum and manufacturers facing a headwind to order books from rising output charges. Moreover, the Gfk consumer confidence indicator tumbled to a near-record low in April. Money markets are currently pricing around 150 basis points of additional BoE rate hikes by year-end from 160 bps on Friday. BoE Governor Andrew Bailey warned last week about risks of a possible recession and a slowdown in the labour market.expectations. British retail sales volumes tumbled 1.4% from a month earlier in March, much worse than market expectations of a 0.3% decrease. Also, PMI data signaled a marked cooling in the pace of UK economic growth during April with service providers experiencing a considerable loss of momentum and manufacturers facing a headwind to order books from rising output charges. Moreover, the Gfk consumer confidence indicator tumbled to a near-record low in April. Money markets are currently pricing around 150 basis points of additional BoE rate hikes by year-end from 160 bps on Friday. BoE Governor Andrew Bailey warned last week about risks of a possible recession and a slowdown in the labour market.