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451 (edited by KostiaForexMart 2022-04-19 15:41:18)

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Covid-19 outbreak in China damages growth prospects of country's economy

China's economy is set to break growth records, but an unexpected outbreak of coronavirus, forced restrictive measures, and numerous problems abroad are limiting its surge.

In Q1 2022, the country's GDP showed fairly strong growth compared to the previous quarter. The GDP jumped by 4.8% on a yearly basis, according to the published data from the National Bureau of Statistics of China. According to Trading Economics, experts had forecasted China's economy to grow at a lower rate of 4.4%. Notably, in Q4 2021, China's GDP rose at an annualized rate of 4%. In the first three months from the beginning of this year, the Chinese economy grew by 1.3%.

China is trying to cope with the resulting domestic and external difficulties, compensating for the obvious dips in the economy in March with surprisingly strong growth of indicators in January and February. However, the effects of the COVID-19 outbreak on China's economy cannot be avoided. Severe restrictive measures, which the Chinese government imposed on its population in March, undermined the production of goods and markedly reduced consumer spending within the country. Only the sharp growth of the economy in the first two months of 2022 formed quite optimistic overall figures for the entire first quarter.

Consequently, retail sales fell by 3.5% in March, showing a much worse-than-forecast reading, while in January-February they were estimated at 6.7%.

The Chinese labor market traditionally experienced a revival in March, as factories usually try to attract as many employees as possible to their shops after the Lunar New Year holiday. This March, however, the sector suffered a severe shock. According to surveys, the national unemployment rate in March was 5.8%, which was last seen only at the beginning of 2020. Moreover, unemployment in more than thirty major cities reached a record 6.0%.

The industrial sector in China showed more positive figures in March than the labor market. Given the widespread shutdowns, production managed to increase by 5.0% year-on-year and even beat forecasts of 4.5%. However, we should admit that compared to the unprecedented rise in January-February, when production increased by 7.5%, the figures for March were rather lackluster.

The investment into the fixed capital in the first quarter is following a similar scenario: investment increased, but there was some damage in March to the elated growth of the first two months of the year. Thus, investment in fixed capital in the first quarter grew by 9.3% year-on-year, but this growth is not so positive, as in the first two months alone it was as much as 12.2%. Notably, fixed-asset investment is the key growth driver of the Chinese economy. These are the indicators that the Chinese government is counting on.

The real estate market in China is increasingly slipping into recession. Home sales by value fell by a full 26.2% year-over-year in March, and new construction declined by 17.5%. According to Reuters, the drop was the largest since early 2020.

The unexpected outbreak of coronavirus in China derailed the enthusiastic growth of the economy and sent it into a sluggish state of moderate recovery. The Russian-Ukrainian conflict and the sanctions imposed on Russia have also hit key sectors of the Chinese economy, as they have shaped unprecedented increases in the prices of energy, metals, and wheat, and further undermined global supply chains.

Many economists are already highly doubtful that Beijing can achieve its goal of a 5.5% GDP increase this year. The Wall Street Journal notes that demand for Chinese exports in the US and Europe has been severely weakened due to record inflation last seen decades ago.

452 (edited by KostiaForexMart 2022-04-20 23:20:42)

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Asian indices grow on hopes for support from government

Asia-Pacific stock indices showed mixed trading during Tuesday's session. The Chinese Shanghai Composite and Shenzhen Composite indices increased by 0.12% and 0.06% respectively, while Hong Kong Hang Seng Index showed a rather significant decline of 1.88%. All other regional indicators rose. The Japanese Nikkei 225 index added 0.64%, the Korean KOSPI index gained 0.96%, and the Australian S&P/ASX 200 index increased by 0.52%.

The main reason for the growth of Asian indices was the message of the Central Bank of China about the creation and the soon involvement of a series of measures to state support of enterprises, which were most affected by restrictions related to the spread of coronavirus in the country.

There will also be an increase in lending in regions with a low rate of credit growth. It is suggested that more credit be given to firms engaged in transporting essential goods during the pandemic.

At the same time, there has been an increase in government regulation of companies involved in the technology sector.

The Chinese companies whose securities added in value are Link Real Estate Investment Trust gaining 1.55%, CNOOC, Ltd. increasing by 1.4%, and PetroChina Co. adding 1.2%.

The Nikkei 225 was boosted by the declining yen. This is more beneficial for exporting companies as it increases their potential income.

In February 2022, there was an increase in Japan's industrial production by 2%. In January, this indicator showed a decline of 2.4%. At the same time, the indicator exceeded the forecasts of experts, who assumed that the growth would be only 0.1%.

Meanwhile, investors remain concerned about rising energy and food costs. They lack confidence that central banks can combat inflation without undermining business activity in their states.

Among the companies on the Japanese index, Pacific Metals Co. added 8.4%, Sumitomo Osaka Cement Co. gained 5.2%, and Mazda Motor Corp. increased by 4.8%.

Other Japanese companies showed smaller increases. Toyota Motor Corp. added 1.3%, and Toshiba Corp. jumped by 1.5%. SoftBank Group Corp. dropped by 1.7%, and Fast Retailing Co. decreased by 1.5%.

Among the companies on the KOSPI index, Samsung Electronics Co. added 1.35%, and Hyundai Motor Co. increased by 1.1%. However, Kia Corp. grew only by 0.1%.

Among the components of the S&P/ASX 200 index, BHP Group, Ltd. jumped by 1.3%, and Rio Tinto, Ltd. increased by 1.5%.

Gold quotes fell to more than a week's low

St. Louis Federal Reserve President James Bullard sees no need for the Fed to raise interest rates by more than 50 basis points. However, the central bank has previously raised interest rates more strongly, and therefore Bullard does not rule out a potential increase of 75 basis points.

Meanwhile, Federal Reserve Bank of Chicago President Charles Evans said on Tuesday that federal funds rates could reach 2.5% by the end of the year.

June COMEX gold futures closed down $27.40, or 1.4%, at $1,959 an ounce, the lowest since April 11, while May silver futures fell 76 cents, or 2. 9%, to $25.391 an ounce.

As a result of Monday's session, gold reached the closing high for the most actively traded contracts since March 10. That day, trading ended at a 19-month high of $2,000.40, according to Dow Jones data.

Gold prices rose in six of the last seven sessions, despite rising Treasury yields and a stronger dollar. Rising bond yields increase the opportunity cost of owning gold, which does not generate coupon income. At the same time, the strengthening of the dollar makes commodities denominated in this currency more expensive for holders of other currencies.

The dollar continued to rise on Tuesday: the ICE dollar index, which tracks the dynamics of the US currency against a basket of six other currencies, reached a maximum since March 2020. The Japanese yen fell sharply against the dollar as the BOJ remains overly loose as the US Federal Reserve prepares to sharply raise interest rates and cut its asset balance in an attempt to contain rising inflation.

Meanwhile, gold is gaining support amid the Russian-Ukrainian conflict. Gold is considered a safe-haven asset during times of geopolitical uncertainty.

Technical analysis shows the potential for growth in gold prices, Otunuga notes, but quotes, apparently, are forming a new range. Support is located around $1960 and resistance is at $2000. In the event of a fall below $1960, prices could drop to $1920. In the event of a break above $2,000, the quotes may test the strength of the resistance levels located at the levels in 2009, 2015 and 2050 dollars.

Meanwhile, May copper futures ended the day down 1.8% at $4.718 a pound. July platinum futures fell 3.1% to $988.70 an ounce, while June palladium contracts fell nearly 2.7% to $2,380.40 an ounce.

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Oil market news: while prices falling, return to the old days remains impossible

Oil is declining sharply on Monday due to expectations of falling demand for energy resources in China. Thus, June futures on Brent crude on London's ICE Futures exchange is estimated at $101.37 per barrel today, down by 4.49% from the previous session's close. The price of WTI futures for June on NYMEX electronic trading is $97.42 per barrel, which is 4.42% lower than the result of the previous trading. According to last week's results, the price of benchmark Brent crude fell by 4.5% and WTI crude dropped by 4.1%.

China's largest city and financial center, Shanghai, reported a record number of new COVID-19 cases in the past two days - 39 deaths. The total number of deaths among those infected in this city with a population of 25 million people now stands at 87. The first deaths in Shanghai were reported on April 18. A lockdown was imposed in Shanghai on March 28, with most businesses shut down, markets and stores closed and residents locked in their homes and apartments. The population in Shanghai is daily tested for COVID-19 and those who test positive are sent to isolation centers.

Lockdown in Shanghai strongly affects global markets, as huge batches of Chinese components due to idling in factories and plants simply cannot reach production facilities in other countries.

The lockdowns fully affected the demand for gasoline, diesel, and jet fuel, which in China in April is likely to fall by 20% on a yearly basis. According to Bloomberg, the fuel price drop only for the current month has all chances to reach 1.2 million barrels per day. If this forecast comes true, the drop will be the most rapid since the beginning of the COVID-19 pandemic in the Chinese city of Wuhan more than two years ago.

In the light of Russia's rapidly developing military action in Ukraine, the situation in the oil markets is getting much worse. However, the disrupted global supply chain system, skyrocketing inflation, and acute shortages of energy resources were observed in the world even before the Russian special military operation, which has only worsened the prospects and made it impossible to find a quick way out of the current situation.

However, according to some experts, the conflict in Ukraine will end sooner or later, after which the global commodity market will return to its normal pre-crisis state. For example, analyst Michael Lynch reported in Forbes magazine that Russia's military operation will definitely end. The oil market will no longer have reason to worry, and it is sure to return to normal, and fuel prices will fall to quite acceptable levels. Analysts believe that the situation will be normalized by the lifting of sanctions against Russia. The return to the normal operation of the energy market is probably the main condition for Western European countries to maintain their economies and their usual standards of living.

However, the lifting of sanctions is a forced measure for the political elites of the European Union, but not for the United States. US Secretary of State Anthony Blinken, who has repeatedly stressed in his speeches that it did not matter to his country whether Russia ends its military operation or not, the sanctions against it would not be lifted by the United States anyway.

Oil Price reported that the long duration of today's stalemate increases the chance that there would be no return to the old pattern. For example, the fact that Europe is shifting from pipeline gas to liquefied natural gas and that Russian exports are shifting to Asian markets is irreversible. In this regard, the prognosis so far is disappointing for buyers: high oil prices promise to remain so for a long time.

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May 6. Brent rose to $114 per barrel

The price of oil is rising on Friday on continuing concerns that the market will face a shortage of supply.

The current Brent quote is $112.57 (the daily maximum is at $114 per barrel). WTI oil is trading at $109.56 (the daily maximum is $110.84 per barrel). Analysts note that since the beginning of the week, oil quotes have increased by more than 5% and may end with a strong increase for the third week in a row.

OPEC+ countries yesterday agreed to maintain the plan to increase the production quota in June by 432 thousand barrels per day. However, despite a systematic increase in quotas since August 2021, OPEC+ cannot reach the permitted production level. It is noted that by the end of March, producers lagged behind by 1.45 million b/s.

Meanwhile, European states are preparing to restrict oil imports from Russia. Earlier this week, the European Commission proposed to impose an embargo on Russian oil supplies to EU countries as part of the upcoming sixth package of sanctions. An additional impact on the dynamics of oil prices is the concern about demand due to the outbreak of coronavirus in China, as well as about the increasingly narrowing supply.

Moreover, the US has announced its intention to start buying oil on the market to replenish the strategic reserve (SPR). It is expected that the Ministry of Energy will begin accepting applications from sellers this fall, although real deliveries will begin later.

May 5. Bank of England hikes interest rates to 13-year high

The Bank of England has raised interest rates to the highest level since 2009 to counter inflation, which could exceed 10% this year.

The regulator raised the rate from 0.75% to 1%. Some representatives of the central bank called for an even greater increase – up to 1.25%, in order to eliminate the risk of inflation entering the economy.

Today's Bank of England move represents the fourth consecutive rate hike since December – and the fastest increase in borrowing costs in 25 years.

The regulator also did not rule out further tightening of monetary policy in the coming months.

In addition, the Bank of England said that it is also concerned about the impact of China's policy to block Covid-19, which threatens to hit supply chains again and increase inflationary pressures.

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May 13. Oil market shows signs of recovery

The price of oil continues to rise on Friday amid uncertainty about the imposition of a European embargo on oil supplies from Russia. Some EU countries believe that it is necessary to postpone the embargo on Russian imports if Hungary still does not support this ban.

An additional influence on price dynamics is exerted by the situation in China, where the incidence of Covid-19 has declined.

The current Brent oil quote is $108.87 per barrel. The daily high was marked at $109.72. The cost of North American WTI oil is located near $107.30 (the daily maximum is $108.12 per barrel).

Investors also drew attention to the forecast of the International Energy Agency (IEA), according to which the decline in the supply of Russian oil on the world market in the second half of the year may reach 3 million barrels per day. In April, Russia had already reduced production by almost 1 million b/d, which led to a reduction in global supplies by 710 thousand b/d (to 98.1 million b/d).

At the same time, pressure on the oil market is exerted by fears that a rapid tightening of monetary policy by world central banks will provoke an economic downturn and a subsequent decline in demand for energy resources.

May 12. Bitcoin has broken through the level of $26 thousand

The bitcoin exchange rate continues its decline, which began yesterday. The current quote of the most popular cryptocurrency is $27.775.40, the daily minimum was marked at $25.845. The market capitalization of the asset decreased to $515 billion with daily trading volumes of $ 71 billion.

The crypto market began to decline after the publication of inflation data in the United States. According to the US Bureau of Labor Statistics, consumer prices rose by 8.3% in April. This indicator turned out to be 0.2% higher than forecasts (8.1%) and approached the highs for 40 years.

Such statistics somewhat scared investors who hurried to get rid of high-risk assets, including cryptocurrencies. According to experts, both stocks and crypto assets fell in price, which caused panic in the market.

It is worth noting that bitcoin has already fallen below the level of $29 thousand twice in a week. Experts call the $30 thousand level a landmark reference point for bitcoin – until recently, the cryptocurrency rose above $40 thousand, but quickly returned back.

Another event that had an impact on the cryptocurrency market was the news about the Terra project. Unexpectedly, the popular TerraUS stablecoin rapidly collapsed, its exchange price was much less than the declared $ 1. At the same time, it is known that the stablecoin was provided by other digital assets, including bitcoin.

In addition to bitcoin, other cryptocurrencies have also fallen in price. The Ethereum exchange rate today is located at $1909.35 (the daily minimum is $1720.58). The cost of Binance Coin has lost 26%, XRP and Solana have become cheaper by 28% and 35%, respectively. The overall valuation of the cryptocurrency market decreased by 18.5% to $1.2 trillion.

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May 16. Gold fell below $1,800 for the first time since the beginning of February

Today, the price of gold fell below the psychological level of $1,800 for the first time since the beginning of February. The daily low was fixed at $1,785.40 per troy ounce. The current quote for the precious metal is $1,815.87.

Analysts note that at the end of the past week, the price of gold fell by 3.9%, a record pace since June 2021.

Experts say that the main reason for the decline in quotes is the strong dollar and the growing yield of bonds, because against this background, gold, which does not bring interest income, loses its attractiveness in the eyes of investors.

The ICE currency index, which shows the dynamics of the dollar against six major world currencies, is down about 0.15% on Monday after rising to a 20-year high last Friday.

July futures for silver, meanwhile, are growing in price – up to $ 21.465 per ounce. Moreover, last week silver finished falling by 6.2%, the maximum since the end of January.

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May 17. Unemployment in Britain in the first quarter fell to the lowest since 1974

According to statistics from the National Statistical Office (ONS) of Great Britain, unemployment, calculated according to the methodology of the International Labor Organization (ILO), in January-March 2022 fell to 3.7%, which was the lowest since December 1974.

In the period from December 2021 to February 2022, unemployment was 3.8%. Economists expected the indicator to remain unchanged.

ONS data indicate that the employment rate in the country continued to grow in April. The number of jobs increased by 121 thousand last month and reached 29.5 million, and the number of open vacancies reached a record 1.295 million.

Analysts of the department note that for the first time since the calculations, the number of unemployed turned out to be less than the number of vacancies.

The average salary of Britons in the first quarter of 2022 increased by 4.2% in annual terms. At the same time, adjusted for inflation, salaries decreased by 1.2%.

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May 18. Johnson Matthey: palladium market may face a deficit in 2022

According to the review of the world's largest producer of materials for autocatalysts, the British company Johnson Matthey, the palladium market in 2022 may become scarce against the backdrop of a decrease in the output of the metal in South Africa and the risk of disruption in supplies from Russia.

The palladium market was already in deficit in 2020 (about 650 koz), but in 2021 the situation has become relatively balanced.

Johnson Matthey fears that in the current environment, Norilsk Nickel, the world's largest palladium producer, may not be able to supply all of its products to the market. Due to the uncertainty in this matter, it is very difficult to calculate the total supply in the palladium market.

Another major supplier, South Africa, will cut shipments by more than 6% in 2022 compared to 2021, amid depletion of work-in-progress inventories and planned maintenance of processing facilities.

Moreover, the situation in Ukraine created significant supply risks due to Russia's status as the world's largest supplier of palladium and a major producer of platinum and rhodium. At the moment, Russia provided about 28% of the total supply of primary and secondary palladium.

Experts believe that net demand for palladium will grow by 3% in 2022 to 6.9 million ounces. Demand growth will be constrained by weak car production and cost-cutting programs on the part of metal consumers.

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May 19. Tether lost $7 billion: is it the collapse of stablecoins?

According to CoinGecko, Tether's turnaround offer has dropped from about $83 billion a week ago to less than $76 billion dollars on Tuesday. Investors withdrew more than $7 billion from this stablecoin after it briefly lost its dollar peg.

As you know, Tether is tied to the dollar – it should always cost $1. But last Thursday, its price dropped to 95 cents amid panic over the collapse of a competing token called Terra USD.

Most stablecoins are backed by fiat reserves, which means that they have enough collateral in case users decide to withdraw their funds from them. However, the new generation of «algorithmic» stablecoins (such as Terra USD or UST) have a dollar peg based on a mathematical code.

The loss of the dollar peg drew attention to the problem of reserves behind Tether. When the reserves data were last released, cash accounted for $4.2 billion. Another $34.5 billion consisted of unidentified Treasury bills with a maturity of less than 2 months, and $24.2 billion of assets accounted for commercial securities.

Experts note that the destabilization of tokens has worried regulators in the United States and Europe. Last week, US Treasury Secretary Janet Yellen warned of risks to financial stability if stablecoins continue to grow unchecked. At the same time, she urged lawmakers to adopt laws regulating this sector by the end of 2022.

France is also concerned about the situation in the cryptocurrency market, calling it a «wake-up call» for global regulators. According to the governor of the Bank of France, Francois Villeroy de Gallo, cryptocurrencies can destroy the financial system, especially stablecoins, if they are not regulated. As a result, the European Union plans to subject stablecoins to strict regulatory oversight through new rules known as Crypto Asset Market Regulation or MiCA.

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May 23. Experts believe that the EU will not be able to replace Russian oil

The topic of the embargo on Russian oil is one of the main topics for discussion on the international market. At the same time, a number of analysts believe that the European Union will not be able to find a replacement for Russian hydrocarbons in the medium term in the event of a ban on oil supplies.

Vagit Alekperov, ex-head of the Russian oil and gas company Lukoil, said that in the event of an embargo, Russia will be forced to reduce oil production and freeze wells, as it was at the beginning of the coronavirus pandemic in 2020. Therefore, a ban on oil from the Russian Federation would be a shock to everyone and the most negative scenario for all parties.

Moreover, it will take years to build a new infrastructure to redirect Russian oil entering the European market today.

Earlier, the European Commissioner for Economics Paolo Gentiloni said that the EU member states currently cannot agree on an embargo on the import of Russian oil – Hungary takes a firm position «against». The country insists on extending the transition period and/or withdrawing the country from restrictions. In addition to Hungary, other countries, including Bulgaria, do not agree with the embargo.

It is worth noting that the introduction of an oil embargo against Russia in the EU has been actively discussed since the beginning of May, but so far the dialogue on this issue has not led to a consensus. In addition, it became known that the embargo on oil from the Russian Federation is not spelled out in the basic scenario of the European Commission's spring economic forecast for 2022-2023.

May 20. Cisco shares collapsed 14% amid China lockdown

Shares of network equipment maker Cisco fell sharply on Thursday after the release of a forecast for sales in the current quarter. According to the forecast, the indicator fell significantly due to the damage caused to the supply chain by quarantine restrictions in China.

In particular, the company expects a decrease in sales in the fourth quarter of this fiscal year by 1-5% compared to the same period last year. Analysts, on the other hand, had expected growth of 5.9% to $13.9 billion.

As a result, Cisco shares fell 14% to $41.36 (the lowest price since November 2020), and 24 million shares traded on the exchange exceeded the average daily sales volume of 22 million shares during the first hour of trading.

The company said there was solid demand in the third quarter, but sales were hurt by coronavirus restrictions in China, which cut the company's revenue by $300 million, and a Russian special operation in Ukraine, which reduced sales by another $200 million. It’s expected that the quarantine in Shanghai will be lifted on June 1.

Cisco's Q3 adjusted earnings were 87 cents per share on $12.8 billion in revenue. Analysts had expected 86 cents per share on $13.3 billion in revenue.

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May 26. Brent rises after the release of US data on stocks

On Thursday, the oil market is showing a rise after the release of data from the US Department of Energy on crude oil reserves in the country, which showed a decrease in oil and gasoline reserves before the start of the automotive season.

The current Brent quote is $111.60 (the daily maximum is at $111.86 per barrel). WTI oil is trading at $111.11 per barrel.

According to the report of the Ministry of Energy, commercial oil reserves in the United States for the week ended May 20 decreased by 1.02 million barrels to 419.8 million barrels. Experts on average expected a decrease in reserves by 2.13 million barrels. Stocks at the terminal in Cushing decreased by 1.1 million barrels. Oil production remained at 11.9 million barrels.

Gasoline stocks decreased by 482 thousand barrels, distillates – increased by 1.66 million barrels. Analysts expected a reduction in gasoline stocks by 2.13 million barrels and an increase in distillate stocks by 1 million barrels.

Earlier this week, it was also reported that the administration of US President Joe Biden is considering restricting the export of petroleum products from the country to curb the rise in gasoline and diesel fuel prices.

May 25. Russia and Iran switch to settlements in national currencies

Russia and Iran held a meeting during which the countries agreed to switch to settlements in national currencies and discussed the possibilities of Shetab and Mir payment cards.

The negotiators note that the relevance of the topic of financial and banking relations between countries, as well as the creation of conditions for mutual settlements and payments between legal entities and organizations is a huge step forward.

In addition, the countries discussed swap supplies of oil and gas, as well as increased investments for the implementation of joint oil and gas projects in the republic. According to Russian Deputy Prime Minister Alexander Novak, cooperation between Russia and Iran in the current conditions is becoming one of the most key, including for the transit of goods from the Persian Gulf.

The parties also agreed to accelerate the preparation of an agreement on a free trade zone. Currently, Russia has a free trade agreement with the CIS countries – it was signed on October 18, 2011.

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May 27. Gold shows a downtrend

Gold quotes settled at $1,855 per troy ounce, which is 11% lower than the maximum value reached on March 8, 2022 ($2,078 per ounce).

Since the beginning of May, prices have fluctuated in the range of $1800 – $1870. Analysts note that this trend is the result of a temporary decrease in the degree of geopolitical tension in the world.

Economists predict that gold prices will average $1880 per ounce this year. At the same time, the main factor influencing the dynamics of precious metal prices will be the tightening of the monetary policy of the US Federal Reserve. And a further increase in the federal funds rate of the US Federal Reserve will help maintain the downward trend in gold quotes.

However, analysts do not rule out a trend reversal. This may happen in the event of a more serious deterioration in geopolitics than the market currently predicts.

It is worth noting that gold often acts as an important protective tool for developed countries. As a rule, wealthy EU citizens try to hedge the risks of financial market volatility and sharply increased inflation through investments in gold ETFs or bullion. Current interest rates are not very attractive and do not give Europeans the opportunity to protect their savings. Moreover, the EU countries are in close proximity to the military events in Ukraine, which also strengthens their motivation to invest in protective assets.

At the same time, the demand for gold in China has decreased. Severe coronavirus restrictions negatively affect the physical ability of the population to purchase precious metals.

Summing up the above, it can be assumed that attempts to stabilize the world economy, tightening the DCP and reducing the influence of the geopolitical factor will lead to a gradual decline in gold prices. However, it is worth remembering that a sufficiently high level of uncertainty in the short-term prospects will currently keep prices from falling sharply.

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May 30. Inflation in Germany accelerated to a record 8.7% in May

According to data from the German Federal Statistical Office Destatis, consumer prices harmonized with EU standards jumped by 8.7% year-on-year in May. This indicator has become a record since the beginning of his calculations. Analysts had expected a more moderate growth of 8%. Inflation in April was fixed at 7.8%.

On a monthly basis, consumer prices increased by 1.1% in May after an increase of 0.7% in April. Experts expected an increase of 0.5%.

Consumer prices calculated only by German standards jumped by 7.9% y/y and 0.9% m/m in May. Analysts had expected growth of 7.6% and 0.5%, respectively.

According to the Destatis report, annual growth has become a record since the winter of 1973-74.

Energy carriers rose the most: the price increase in May amounted to 38.3% in annual terms after an increase of 35.3% in April. Food prices rose by 11.1% (in April – by 8.6%). The growth of prices for services slowed to 2.9% from 3.2%.

May 31. The oil market continues to grow on the sanctions news

Oil quotes continue to follow the upward trend that began last week. Then Brent was trading below the level of $110, while today the current quotation of the commodity asset reached $123.32 per barrel.

North American WTI crude is trading at $119 per barrel, up from $105 last week.

The driver for growth today was the news that the leaders of the EU countries finally agreed on a partial ban on the import of Russian oil. In particular, the participants of the debate agreed to impose an embargo on two-thirds of oil supplied from Russia. At the same time, by the end of the year, the EU hopes to get rid of 90% of Russian raw materials.

The decision to impose not a full, but a partial embargo was a compromise, since not all countries supported the introduction of an import ban. Hungary, which is heavily dependent on energy resources from the Russian Federation, opposed it.

Analysts note that a complete rejection of Russian oil may lead to its rise in price to $ 185 per barrel.

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June 1. Experts: 3 tips for surviving a recession

As the likelihood of a recession in the United States grows, more economists are pointing out the growing downside risks and offering advice on how to invest during this period.

Many analysts are bearish in their forecasts as the US economy is experiencing multiple shocks today. Among the main risk factors, experts point out the escalation of the conflict in Ukraine, the rise in oil prices to $150 per barrel, the extraordinary strengthening of the dollar, as well as the strongest pressure on companies due to rising costs.

In this difficult period of constant volatility in the market, economists advise the following:

Buying shares in three defensive sectors

Investment bank Morgan Stanley recommends investing in protective sectors: healthcare, utilities and real estate. In healthcare, stocks trade at a discount to the general market. The Bank favors large-cap pharmaceutical and biotechnology stocks as they trade at an attractive price and offer relatively large dividend yields.

The real estate sector grew 42% last year and outperformed the broader US market by 16%. This sector provides stable income and dividends, in particular – protection against inflation through leases, rent increases and rising property values.

The utilities sector provides relative protection against high costs (due to the established pricing structure in utilities) even against the backdrop of the effects of rising energy prices.

Keeping patience

Analysts are sure that during a recession special patience is required when using cash for any investment opportunity. A bear market can last for about a year and sometimes causes a drawdown of around 30%. Therefore, it is also important to diversify investments throughout the period.

Purchase of investment grade bonds

Another recommendation from experts is to buy quality bonds and avoid low-quality or high-yielding bonds.

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June 3. Economists predict the collapse of thousands of digital currencies

The cryptocurrency market today has more than 19 thousand cryptocurrencies and dozens of blockchain platforms, however, a number of cryptocurrency firms suggest that in the coming years many digital tokens will collapse, and the number of blockchains will decrease. Experts predict that in the future there will be only dozens of cryptocurrencies.

Universal attention to the vulnerability of cryptocurrencies was attracted by the recent collapse of the so-called algorithmic stablecoin Terra USD and the associated digital token Luna. The fall of Luna shocked the market, after which many economists began to think more and more about the future and viability of digital currencies.

Web3 Foundation CEO Bertrand Perez drew a parallel between cryptocurrencies and «dotcoms». He believes that the collapse of Terra was one of the consequences of too many blockchains and tokens on the market, which confuses users and involves some risks for them.

Just like at the beginning of the Internet era, when too many «dotcom companies» appeared, many of them were fraudulent and did not bring any value. However, over time, the market «cleared» of them, leaving only useful and legitimate companies. Today, the situation in the crypto market is repeating itself, and many experts agree that most of the cryptomonets will no longer exist in the future. The only question is which ones will stay afloat. A number of analysts believe that only bitcoin and Ethereum will survive.

Currently, the market continues to be under pressure. Bitcoin has fallen by more than 50% compared to its all-time high reached in November ($67,789). The current BTC quote is $30,416. Many other digital currencies have also seriously fallen in price compared to historical peaks.

June 2. US stock market closed in the red on fears of tightening monetary policy

The US stock market closed in the red, although at the beginning of yesterday the trading session began with growth.

The value of the Dow Jones Industrial Average fell by 0.54% to 32,813.23 points. The Standard & Poor's 500 dropped 0.75% to 4101.23 points. The Nasdaq Composite index lost 0.72% to 11,994.46 points.

Surprisingly, the negative factor this time was the strong statistics on manufacturing activity in the country, because, according to experts, it increased the likelihood of a more aggressive tightening of the Fed's monetary policy.

In particular, the index of business activity in the US manufacturing sector in May increased to 56.1 points from April's 55.4 points. Analysts on average expected it to decline to 54.5 points. Tomorrow we should pay attention to the statistics on the American labor market. It is expected that unemployment will decrease in May to 3.5% (from 3.6% in April), and the number of jobs will grow by 325 thousand (after an increase of 406 thousand in April).

Analysts note: «There is some irony in the fact that the pressure on the US stock market may increase if the statistical data indicate the continued active growth of the US economy and raise the yield of government bonds to the highs of the current cycle.»

In addition, on June 1, the Fed began reducing the amount of assets on its balance sheet, which reached $ 9 trillion.

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June 6. Asian stock markets showed growth, pulling European indices along with them

Stock indices of the Asia-Pacific region (APR) on Monday mainly show growth after the publication of strong statistics on China.

The business activity index (PMI) in China's services sector rose to 41.4 points in May from 36.2 points a month earlier. The composite index in industry and services rose from 37.2 points in April to 42.2 points in May.

As a result, the South Korean index of the Shanghai Stock Exchange Shanghai Composite ended trading up to 3236.37 points, the index of the Shenzhen Stock Exchange Shenzhen Composite rose to 2073.56 points, and the Hong Kong Hang Seng Index rose to 21653.9 points.

Positive statistics on China have improved traders' expectations about the prospects for economic recovery, especially in light of the easing of quarantine restrictions in the country. Following the Asian markets, European stock indexes also started to grow.

In particular, the British FTSE 100 index rose to 7626.28 points, the French CAC 40 – to 6542.73 points, the German DAX – to 14560.11 points.

In addition, European indices are supported by shares of energy companies, which are becoming more expensive against the backdrop of rising oil prices. For example, the securities of Eni, Total Energies, Shell and BP are growing in price by 1.33%, 1.43%, 0.87% and 2.28%, respectively.

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June 7. The yen is trading at a 20-year low to dollar on the softer policy of the Central Bank of Japan

According to trading data, the Japanese yen is trading at a twenty-year low against the dollar amid a softer monetary policy of the central bank of Japan.

On Tuesday morning, the yen fell against the US dollar to 132.77. Earlier in the course of trading, the Japanese currency fell even lower against the dollar – to the minimum of April 2002.

Economists note that the weakening of the yen against the dollar is due to the rhetoric of the Central Bank of Japan. The regulator intends to maintain the current soft parameters of monetary policy, while the US Federal Reserve makes more «hawkish» decisions on the discount rate.

On the eve of the deputy head of the central bank Masazumi Wakatabe said that it is necessary to patiently continue easing monetary policy, without excluding the possibility of additional easing.

In addition, yesterday, the head of the Bank of Japan, Haruhiko Kuroda, said that the priority for the regulator is to support the economy and commit to maintaining monetary stimulus. He noted that the economic situation in Japan today does not require tightening of monetary policy at all, since the economy is still in the process of recovering from the effects of the pandemic.

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June 8. New obstacles in concluding a deal for Musk's purchase of Twitter

The uncertainty surrounding the deal to buy Twitter by Elon Musk may lead to the disruption of plans to attract an additional $ 2-3 billion from third-party investors.

At the moment, Musk's attempts to organize new financing of the transaction have been suspended. In total, the entrepreneur planned to invest $ 33.5 billion in the transaction, and to attract the rest (of the total $ 44 billion) from outside investors.

It is clarified that Musk intended to receive additional financing from a group of private investment companies led by Apollo Global Management Inc in exchange for preferred shares of Twitter.

However, back on April 15, Twitter's board of directors adopted a shareholder rights protection plan, which was supposed to prevent an undesirable takeover of the company by Musk. On April 25, the parties still managed to agree on a deal. According to the agreements, Musk will buy Twitter for $ 44 billion ($54.2 per share).

But in May, the conclusion of the deal was again in question: Elon Musk stated his desire to make sure that spam and fake Twitter accounts account for less than 5%. And the day before yesterday, on June 6, Musk accused Twitter that the company refuses to provide this information and thus violates the agreement on the deal.

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June 9. Oil prices continued to rise after reaching highs the day before

Oil quotes continued to remain stable on Thursday after rising to three-month highs the day before ($124.40). The current price of Brent is $123.41 per barrel.

The market continues to analyze statistical data on the volume of raw materials stocks in the United States and on China's foreign trade for May. The volume of Chinese exports jumped by 16.9% year-on-year last month amid the lifting of many covid restrictions in the country.

Yesterday, the US Department of Energy reported an unexpected increase in oil reserves in the country by 2.02 million barrels to 416.76 million barrels. It is clarified that this is due to an increase in imports to the country to 1.9 million barrels per day (against 0.08 million barrels a week earlier).

At the same time, gasoline reserves decreased by 812 thousand barrels and amounted to 218.18 million barrels. The drop in gasoline stocks was a consequence of the beginning of the automobile season in the United States, when demand for fuel is traditionally high.

Fuel consumption in the country in the reporting week exceeded 20 million barrels per day (and for the same period, these are the highs from the pre-2019 year).

In general, the confirmation of high demand and low inventory levels reinforced investors' confidence in maintaining the deficit and were able to push oil quotes up. Some analysts predict that once fixed above the level of $120 per barrel, oil will be able to go higher – with a target in the area of $130-135 per barrel.

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June 15. Industrial production in China increased by 0.7% in May

According to the data of the National Bureau of Statistics, the volume of industrial production in China in May increased by 0.7% compared to the same month in 2021 against the background of the weakening of quarantine coronavirus measures in the country. Analysts on average expected a decline of 0.7% last month. In April, industrial production in China fell by 2.9%.

In particular, manufacturing output rose 0.1% after falling 4.6% in April. The output of chemical products and raw materials increased by 5%, food products – by 1.6%, communication equipment – by 7.3%. The growth of mining production in May slowed to 7% from 9.5% in April, electricity generation – from 1.5% to 0.2%.

In the first five months of this year, Chinese industrial production increased by 3.3% compared to the same period in 2021.

The National Bureau of Statistics of China also presented statistics on retail sales in May. The decline in sales slowed to 6.7% year-on-year after falling 11.1% in April. Analysts had expected a decrease of 7.1%. It is noted that sales have been declining for the third month in a row amid restrictions to combat a new outbreak of coronavirus. In the period from January to May, retail sales decreased by 1.5%.

Unemployment in China fell to 5.9% in May, compared with 6.1% in April. The target unemployment rate in the country today is 5.5%.

June 14. Bitcoin remains below $23 thousand

On Tuesday, the price of bitcoin continues to remain in the area of local lows: the current price of BTC is $22153. During the day, the cryptocurrency even dropped to $20,834, for the first time since December 2020.

Analysts note that against the background of falling quotations, the capitalization of the cryptocurrency market has fallen below $1 trillion and is now $959.1 billion.

The price of bitcoin has been declining for seven consecutive trading sessions. During all this time, the cryptocurrency has lost about 27% of its value. The strongest decline occurred at the beginning of this week – at the same time there were sales on the world stock markets. Yesterday, for example, the main US stock indexes fell by 2.8-4.7%, and the indices of Asia and Europe today show multidirectional dynamics.

In total, since the beginning of June, bitcoin has fallen in price by more than 28%, in spring its value has dropped by 26%, since the beginning of the year – by half. At the beginning of January, bitcoin cost $ 46.2 thousand.

Economists note that the crypto market is also under pressure after one of the largest multifunctional players in this area, Celsius Network, on Monday suspended the possibility of withdrawing funds due to a liquidity crisis.

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June 16. The Swiss Central Bank raised the rate for the first time in 15 years

Today, the Swiss National Bank (SNB) made an unexpected decision to raise the deposit rate for the first time since September 2007. The rate was raised immediately by 50 basis points, and currently it is minus 0.25% per annum. The previous rate level (minus 0.75% per annum) has been held since 2015.

The regulator noted that the purpose of tightening monetary policy is to prevent the spread of inflation to goods and services in Switzerland. Also, the Central Bank does not exclude the possibility of further rate hikes to stabilize inflation in a range that ensures price stability in the medium term.

After the announcement of the results of the Central Bank meeting, the Swiss franc rate soared against the euro: to 1.0204 euros from 0.9631 euros the day before. Against the US dollar, the franc rose by 1.26% and was trading near 0.982.

June 17. Bitcoin is approaching the $20 thousand mark

Bitcoin continues to demonstrate a persistent «bearish» trend, approaching the main psychological threshold of $20 thousand. The current bitcoin quote paired with the US dollar is $20880.

The pressure on the most popular cryptocurrency continues to be exerted by sales on the world market and the mass withdrawal of investors from risky assets. For example, the Nasdaq index closed more than 4% lower on Thursday, and the S&P 500 fell 3.25%. The Dow Jones index fell below the key threshold of 30,000 points for the first time in more than a year, falling by 2.42%.

The French CAC 40 index ended the day down 2.39%, while the German Dax index fell 3.31%.

Yesterday, European investors were surprised by an unexpected rate hike of 0.50% by the Swiss National Bank. As you know, the central bank of Switzerland is one of the most «dovish» regulators, and the rate was raised for the first time in the last 15 years.

However, despite all the negative factors, analysts also highlight a positive moment in the dynamics of the cryptocurrency – the fact that bitcoin has not yet tested the threshold of $20 thousand. And if the asset manages to return to the $25k area, it could lead to a new upward rally (as at the end of 2020, when BTC rose sharply to a historic high above $60k).

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June 21. The Bank of England urged not to use monetary policy to stabilize the pound

Hugh Pill, chief economist at the British central Bank, said that the Bank of England should focus its monetary policy on the main goal of controlling inflation, rather than trying to stabilize the exchange rate or economic activity.

Pill also noted that the regulator should pay attention to what is happening in the foreign exchange market and in other central banks, but at the same time realistically assess their capabilities.

«Monetary policy is an inaccurate tool, not a panacea,» the economist stressed.

A day earlier, a member of the Monetary Policy Committee, Catherine Mann, suggested that a more significant increase in interest rates in the short term could compensate for the weakening of the pound caused by inflation.

In December, the Bank of England became the first of the key central banks to raise the cost of borrowing after the pandemic and has since raised the key rate five times, bringing it to 1.25%. Pill suggested that further policy tightening may be required in the coming months, as inflation is approaching 11%.

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June 22. Inflation in the UK has updated the maximum in more than 40 years

According to the Office for National Statistics of the UK, in May consumer prices jumped by 9.1% compared to the same month last year. As a result, inflation in the country accelerated to the highest in more than 40 years. The current indicator coincided with analysts' forecasts.

In April, the annual inflation rate was recorded at 9%.

On a monthly basis, consumer prices in May rose by 0.7% compared to last month after a jump of 2.5% in April. Experts expected an average increase of 0.6%.

Analysts note that the increase in inflationary pressure in the UK is mainly due to higher prices for food and energy, including electricity, gas and gasoline.

Prices excluding food, alcohol, tobacco and energy (core inflation, CPI Core) in May increased by 5.9% in annual terms and by 0.5% monthly. In April, their growth was 6.2% and 0.7%, respectively.

Retail prices (RPI index) soared by 11.7% year-on-year after rising by 11.1% a month earlier. It is worth noting that it is the RPI index that is used by British employers when negotiating salaries.

June 23. The Asian market fell after Powell acknowledged the risk of a recession

The stock market of the Asia-Pacific region on Thursday morning is mainly reduced. Investors continue to assess the prospects for monetary policy after the head of the US Federal Reserve Jerome Powell acknowledged the risk of a recession.

In particular, the Japanese Nikkei 225 fell to 26.039 points, the South Korean KOSPI fell to 2.314. The Australian ASX 200 fell to 6.425. Hong Kong Hang Seng – to 21.008.

The Chinese Shanghai Composite is growing – up to 3.320.15 points. Shenzhen Component – up to 12.514.73.

Investors’ fears intensified after Jerome Powell said that a recession in the US economy is a very likely outcome. A sharp increase in interest rates can lead to an economic downturn.

At the same time, Powell acknowledged that the rate will continue to rise, but the Open Market Committee (FOMC) is monitoring the incoming data, which implies strict control over the situation, and monetary policy tightening will not be carried out solely on autopilot.

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