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Market News Financial breakfast on May 18: Global stock markets rose, the dollar fell for three consecutive weeks to a new low in a week and a half, and the rebound of gold prices was suppressed by Powell's remarks

Financial breakfast on May 18: Global stock markets rose, the dollar fell for three consecutive weeks to a new low in a week and a half, and the rebound of gold prices was suppressed by Powell's remarks

Global stock markets rose on Tuesday, with the dollar hitting a one-and-a-half-week low on rising investor risk appetite. Spot gold is temporarily hovering around 1815, and the rebound in gold prices on Tuesday was blocked near the 200-day moving average, as Fed Chairman Powell and other officials continued to strengthen expectations of aggressive interest rate hikes, and rising stock markets also suppressed gold’s safe-haven demand. Oil prices fell 2% on Tuesday after hitting a seven-week high on news that the United States will ease some restrictions on the Venezuelan government.

TOPONE Markets Analyst
2022-05-18
7078
On Wednesday (May 18), the U.S. dollar index fluctuated within a narrow range at the beginning of the Asian market. It is currently trading around 103.32, not far from the one-and-a-half-week low of 103.22 set overnight. Global stock markets rose on Tuesday, and investors’ rising risk appetite weakened the dollar. Appeal. Spot gold is temporarily hovering around 1815, and the rebound of gold prices on Tuesday was blocked near the 200-day moving average, as Fed Chairman Powell and other officials continued to strengthen expectations of aggressive interest rate hikes, and rising stock markets also suppressed gold’s safe-haven demand. Oil prices fell 2% on Tuesday after hitting a seven-week high on news that the United States will ease some restrictions on the Venezuelan government.



In commodities closing, Brent crude futures fell $2.31, or 2%, to settle at $111.93 a barrel; U.S. crude futures fell $1.8, or 1.6%, to settle at $112.40 a barrel. Gold futures for June delivery rose 0.3% to settle at $1,818.90 on the New York Mercantile Exchange.

At the close of U.S. stocks, the S&P 500 climbed 2.02% to close at 4,088.85 points. The Nasdaq rose 2.76% to 11,984.52 and the Dow Jones Industrial Average rose 1.34% to 32,654.59.

Preview Tuesday





List of major global market conditions



U.S. stocks ended sharply higher on Tuesday, boosted by Apple, Tesla and other growth giants, as strong April retail sales data eased concerns about slowing economic growth.

Ten of the S&P's 11 major sector indexes rose, with financials, materials, consumer discretionary and technology all gaining more than 2 percent. Investors were cheered by data showing U.S. retail sales rose 0.9% in April as consumers bought cars as supplies improved and frequented restaurants.

Microsoft, Apple, Tesla and Amazon, which have been selling off recently, rose between 2% and 5.1%, pushing the S&P 500 and Nasdaq higher. Stocks rallied across the board on Tuesday after a weeks-long sell-off in U.S. stocks that last week saw the S&P 500 fall to its lowest level since March 2021.

"The giants that investors tend to buy are basically down, either in correction territory or in a bear market," said Sylvia Jablonski, chief investment officer at Defiance ETFs. "I think investors are looking for dips. I'm guessing today is a good time to do that."

The S&P 500 bank index jumped 3.8 percent, with Citigroup jumping nearly 8 percent after Buffett's Berkshire Hathaway BRKa.N disclosed that it had invested nearly $3 billion in the U.S. bank.

A separate set of economic data showed industrial production rose 1.1% last month, beating expectations for a 0.5% rise and up from 0.9% in March.

"This is consistent with continued economic growth in the second quarter, rather than a recession on the horizon," said Bill Adams, chief economist at Comerica Bank.

Federal Reserve Chairman Jerome Powell said at an event on Tuesday that the central bank will "continue to push" to tighten monetary policy until inflation falls significantly. Traders are pricing in an 85% chance of a 50 basis point rate hike in June.

The S&P 500 climbed 2.02% to close at 4,088.85. The Nasdaq rose 2.76% to 11,984.52 and the Dow Jones Industrial Average rose 1.34% to 32,654.59.

European stocks also rose across the board on Tuesday. As of the close, the Stoxx Europe 600 index rose 1.2% to 438.97 points; Britain's FTSE 100 index rose 0.7% to 7,518.35 points; France's CAC 40 index rose 1.3% to 6,430.19 points; Germany's DAX index rose 1.6% to 6,430.19 points 14,185.94 points.

precious metal


Spot gold edged lower on Tuesday. Strong U.S. retail sales data and expectations of aggressive interest rate hikes overshadowed the support from the dollar's retreat. Rising European and American stock markets also suppressed gold prices.



The weakening of the dollar once helped gold prices rebound to around 1836, which was close to the 200-day moving average resistance, but then fell back to close at around $1815. U.S. gold futures rose 0.3% to $1,819.70.

U.S. retail sales surged in April, signaling strong demand despite persistently high inflation, easing some fears that the economy is slipping into recession.

TD Securities commodities strategist Ryan McKay said gold appeared to be under some pressure after the data. Sentiment in the precious metals market is starting to turn more bearish, which could be bad news for the future of gold, with more people liquidating positions ahead, especially if the Fed continues to send hawkish signals.

The U.S. dollar retreated, which capped gold's losses and made gold cheaper for holders of other currencies.

Also reflecting investor sentiment, holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, were at their lowest level since early March.

crude


Oil prices fell 2% on Tuesday after hitting a seven-week high on news that the United States will ease some restrictions on the Venezuelan government.



Oil prices fell further after Federal Reserve Chairman Jerome Powell said there could be some economic pain amid lowering inflation.

He said the U.S. Federal Reserve would "continue to push" monetary policy to tighten until inflation fell significantly.

"Some of those comments have cooled buying enthusiasm for oil," said Phil Flynn, an analyst at Price Futures Group.

Brent crude futures fell $2.31, or 2 percent, to settle at $111.93 a barrel, while U.S. crude futures fell $1.8, or 1.6 percent, to settle at $112.40 a barrel.

The U.S. government will authorize U.S. oil company Chevron to hold talks with Venezuelan President Nicolas Maduro's government as soon as Tuesday, temporarily lifting a ban on such talks, the sources said.

Before that, Brent hit $115.69, its highest level since March 28. U.S. crude hit $115.56 a barrel, its highest since March 24.

Supporting oil prices at highs came after European Union foreign ministers on Monday unsuccessfully pressured Hungary to drop its opposition to a proposed oil embargo. But some diplomats pointed to an agreement on a phased embargo on Russian oil at the May 30-31 summit.

foreign exchange


The dollar fell for a third day on Tuesday, extending its retreat from a 20-year high against a basket of major currencies, as rising investor risk appetite dented the greenback's appeal.

Upbeat earnings news from Home Depot HD.N and United Airlines, as well as optimism over an easing of pressure on the tech sector in Asia and coronavirus lockdowns, helped lift risk sentiment.



The dollar index fell 0.7 percent to 103.22 on Tuesday, its lowest level since May 6. The index hit a 20-year high last week, supported by a hawkish Federal Reserve and concerns about the impact of the Russia-Ukraine conflict on the global economy.

"Sentiment has improved significantly from last week, with most asset classes rebounding and reversing last week's trend," Brad Bechtel, global head of foreign exchange at Jefferies, said in a note to clients. It was stocks that rose, fixed income assets sold off, and almost every currency in the world rose against the dollar."

Data showed U.S. retail sales rose strongly in April and motor vehicle sales climbed amid improving supplies and spending at restaurants, giving the economy a major boost at the start of the second quarter. The dollar remained sluggish after that.

The euro rose 1% to as high as 1.0427 against the dollar, extending a recovery from last week's five-year low that pushed the euro further away from parity with the dollar.

The euro strengthened following hawkish remarks from Dutch central bank governor and European Central Bank Governing Council member Knott. The euro has benefited from a weak euro that could threaten price stability in the euro zone, another European Central Bank governing body and French central bank governor Francois Villeroy de Galhau said on Monday.

Knott said the ECB will not only raise interest rates by 25 basis points in July, but is also prepared to consider a larger rate hike if inflation is higher than expected.

"We think the euro's decline is starting to look excessive," said Shaun Osborne, chief currency strategist at Scotia Bank.

Sterling also took advantage of a weaker dollar to jump 1.,4% to hit as high as 1.2498, its highest level since May 5, after strong UK labor market data reinforced expectations that the Bank of England will keep raising interest rates to fight inflation. expected.

The Australian dollar, which is seen as a liquidity indicator of risk appetite, rose 0.8% to hit an intraday high of 0.7039, near a fresh one-week high.

Minutes of the meeting released on Tuesday showed that the Reserve Bank of Australia had considered a larger rate hike at its May meeting, strongly suggesting another hike in June.

international news


U.S. retail sales and manufacturing output rose strongly in April, underlining the underlying strength of the economy Bring a major boost.
② Tuesday's report from the U.S. Commerce Department showed a broad rise in retail sales, a sign that demand remains strong despite stubbornly high inflation and deteriorating consumer confidence.
③ It also eased fears that the economy is about to fall into recession. Other data showed industrial production accelerated in April, also highlighting the underlying strength of the U.S. economy.
④ Rising wages as companies scramble to hire scarce workers, coupled with the huge savings people have amassed during the COVID-19 pandemic, are supporting spending. Consumer credit card usage has also increased. Strong spending means the Fed will need to stick to its plan to cool demand.
⑤ Retail sales rose 0.9% in April, in line with economists' expectations. Data for March was revised up to a 1.4% increase, from a 0.5% increase previously. April retail sales growth reflected strong demand and rising prices. Retail sales jumped 8.2% year-on-year.
⑥ Core retail sales, which exclude autos, gasoline, building materials and food services, rose 1.0% in April. The reading for March was revised to a 1.1% gain from a 0.1% decline previously.
⑦ Core retail is closest to the consumer spending component of gross domestic product (GDP). Solid growth in April suggests consumer spending is off to a strong start to the second quarter


Federal Reserve Chairman Jerome Powell vows that inflation will not cut and interest rates will not stop ① Federal Reserve Chairman Powell promised on Tuesday that the Fed will raise interest rates to the level needed to curb a surge in inflation, which he said has posed a threat to the economic fundamentals.
② “What we need to see is a clear and convincing pullback in inflation, and we will continue to act until we see that,” Powell said at a Wall Street Journal event. More aggressive action to tighten financial conditions is not considered. Achieving price stability, restoring price stability, is absolutely necessary. We have to do this because without price stability, the economy is not good for workers, businesses, or anyone. This Really the cornerstone of the economy.”
③ Powell acknowledged that controlling inflation could lead to "pain" like slowing economic growth or rising unemployment, but he said there was a "path" to slowing the pace of price increases without triggering a full-blown recession.
④ However, Powell said that if inflation does not fall, the Fed will continue to raise interest rates until inflation falls.
⑤ "If this involves interest rates going above what is generally understood to be a 'neutral' level, we will not hesitate to do so," Powell said, referring to a level of interest rates that neither stimulates nor constrains economic activity. "We'll keep going until we feel like we've gotten to the point where we can say 'yes, financial conditions are in the right place, we're seeing inflation come back down'."
⑥ What happens next -- how much more the Fed will raise rates, and how fast -- depends on how the economy and inflation evolve, and Powell said the Fed will "assess at each meeting based on the data. "

Chicago Fed President Evans: Support rapid rate hikes in the early stage, and then more "controlled" rate hikes ① Chicago Fed President Evans said on Tuesday that he supports early tightening of monetary policy first, and then more "controlled" to "land" to allow time to assess the impact of inflation and rising borrowing costs on the labor market.
② Evans said in a speech prepared to be delivered to the NYU Money Marketeers Forum: "I think it is important to push ahead to accelerate the necessary tightening of financial conditions and demonstrate our commitment to contain inflation, thereby helping to control inflation. expected."
③ Evans said that he supports the early increase in interest rate hikes. “Monetary policy plays an important role in responding to widespread price increases and controlling expectations. Rates should be raised “quickly” to a neutral range of 2.25%-2.5%, with core inflation expected to decelerate significantly as virus-related price pressures ease ."

Fed's Kashkari: How high a rate hike can be largely depends on how quickly supply chain problems ease ① Minneapolis Fed President Neel Kashkari said on Tuesday that the U.S. Federal Reserve (FED/ How far the Fed ultimately needs to raise interest rates will largely depend on how quickly supply bottlenecks are eased.
②Since March, the Fed has raised the target range of policy interest rates by 75 basis points to 0.75%-1%. Kashkari said that the Fed has hinted that by the end of this year, the benchmark interest rate will reach at least a neutral level, which is usually estimated at 2.5% or so.
③ "The question I ask myself now, and I also ask my economists, do we just need to deliver on our promises - is that enough - or do we need to do more?" Kashkari told Sault Ste . Marie Chamber of Commerce, "I don't know the answer to that question."
④ Raising borrowing costs is aimed at cooling demand to reduce inflation. Inflation is currently more than three times the Fed's 2% target.
⑤ But price increases are also driven by supply constraints in the labor market and commodity production. This is not a problem the Fed can solve.
⑥ Kashkari said that private companies are doing everything they can to make the supply chain work better again. But just as the supply chain issues were about to ease, the war in Ukraine and China's recent coronavirus lockdown put them in a bind.
⑦ "My colleagues and I will do what we need to do to bring the economy back into balance," Kashkari said. "What I don't know is how much we need to do... If we get some help on the supply side, we Not so much; if we don't get any help on the supply side, we're going to have to do more."

Fed's Bullard: U.S. economic growth may be higher than long-term trend due to strong household spending ① St. Louis Fed President Bullard said on Tuesday that the U.S. economy may continue to grow at a higher-than-trend rate for at least the next 18 months, with the epidemic As the impact fades, households are likely to continue spending.
② A growth rate of 2.5-3% is "quick compared to our long-term potential growth rate," which may be slightly less than 2%, which appears to downplay the federal Potential recession risks from tighter monetary policy by the Reserve Board (Fed/FED). "That's where we're at right now, the labour market is super strong... Household consumption is expected to continue throughout the year."
③ Bullard said at the energy investor conference that people "want to put the epidemic behind them, and they have a lot of spending plans."
④ Bullard said that the Fed plans to continue to raise the federal funds rate by 0.5 percentage points at future meetings, which is still a "good plan" to pull down inflation, and said the Fed hopes to achieve "minimal interference" to reduce inflation. Target.

U.S. Treasury Secretary Yellen: Sanctions on Russian oil, the EU can embargo-tariff two-pronged ① U.S. Treasury Secretary Yellen said on Tuesday that the EU can impose import tariffs on Russian oil, combined with the phased oil embargo that is currently being introduced, to reduce Russia's energy revenue.
② U.S. Treasury officials told reporters that the concept of tariffs will be proposed at this week's G7 finance ministers meeting as a cheaper and faster way to cut Moscow's oil revenue.
③ These officials said the purpose of the tariff plan is to keep more Russian oil on the global market, limit the price surge caused by the total embargo, and limit Russia's revenue from exports.
The European Commission has proposed an embargo on Russian crude, which will be phased in from next year in response to Russia’s war in Ukraine, but some Eastern European countries that rely heavily on Russian oil oppose the plan.
⑤ Yellen said she discussed a range of options to reduce Europe’s energy dependence on Russia with European Commission President von der Leyen in Brussels on Tuesday, adding that tariffs and embargoes “are two things that can be combined.”
⑥ Yellen added that she supports any plan that the 27 EU member states may agree on, but "it is critical that they reduce their reliance on Russian oil."
⑦ She also pledged that the U.S. will help meet the EU’s energy needs, including efforts to increase global oil and gas supplies

The United States is considering preventing Russia from paying its debts and causing it to default, adding to financial pressure on Moscow. The United States is considering preventing Russia from paying its U.S. bondholders by allowing a key waiver to expire next week, a U.S. administration official said on Tuesday. Pay interest.
② It was reported earlier on Tuesday that the Biden administration is prepared to not extend the waiver period after it ends on May 25, which could bring Moscow closer to the brink of default.
③ "It is under consideration, but has not been decided yet," the official told Reuters. "We are considering all options to increase pressure on Putin."
④ It is reported that the U.S. government has decided not to extend the waiver in order to maintain financial pressure on Moscow.
⑤ After Russia invaded Ukraine, the West banned all transactions with the Russian Ministry of Finance, the Central Bank or the National Wealth Fund through sanctions.
⑥ However, the Temporary General License 9A issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on March 2 made an exception for “receiving interest, dividends, or payments due in connection with debt or equity.”
⑦ This license allows Moscow to continue to pay interest to investors, avoid default on government debt, and also allows U.S. investors to continue to receive interest.
⑧ This license will expire on May 25. After that, Russia still has foreign debts worth nearly 2 billion US dollars to be repaid by the end of this year.
⑨ Some market participants have speculated that the Biden administration may extend the waiver to avoid punishing U.S. bondholders.

EU to unveil plan to wean itself off Russian fossil fuels by 2027①The European Commission will unveil a 210 billion-euro plan on Wednesday on how Europe can end its reliance on Russian fossil fuels by 2027 and take advantage of distance from Moscow to accelerate the transition to green energy.
② Russia's invasion of Ukraine, Europe's largest natural gas supplier, has led to heightened concerns about a supply shock in the EU, leading to a rethinking of its energy policy. Russia supplies 40% and 27% of EU imports, respectively, of gas and oil.
③ According to the draft document, in order to wean countries off Russian fuels, Brussels will propose a three-pronged plan: switch to importing more non-Russian natural gas, promote renewable energy faster, and work harder to conserve energy.
④ These draft measures include EU law, non-binding plans, and recommendations that governments may take, and are subject to change before publication.
⑤ Overall, the EU expects these measures to require 210 billion euros of additional investment – which the EU plans to support by releasing more money from its Covid-19 recovery fund for the energy transition, which will ultimately reduce Europe’s annual investment in fossil fuels Billions of euros spent on imports.
⑥ The plan outlines ways to increase non-Russian gas supplies in the short term, emphasizing the possibility of increasing imports of LNG from countries such as Egypt, Israel and Nigeria, as well as getting rid of the infrastructure needed by Russia.

European Central Bank officials strengthen their expectations of raising interest rates in July ① European Central Bank Governing Council member Knott said that the European Central Bank should raise the benchmark interest rate by 25 basis points in July, but did not rule out a larger rate hike.
② ECB Governing Councilor Centeno said that after a long period of ultra-low interest rates, the ECB's monetary policy needs to be normalized, and it must be carried out in a sustainable way to increase the ECB's ability to intervene.
③The second valuation data released by Eurostat showed that the gross domestic product (GDP) of the euro zone in the first quarter increased by 0.3% compared with the previous quarter, an increase of 5.1% compared with the same period of the previous year, which was stronger than the previous expectation, and the employment rate also increased. The rise suggests the euro zone is expanding at a solid pace towards the end of 2021 despite the outbreak of the Ukraine war.
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