Fall in commodity prices last week eased inflation fears :: InvestMacro

by just forex

At the stock market close on Friday, the Dow Jones (US30) was up 2.68% (+5.31% weekly), while the S&P 500 (US500) was up 3.06% (+6.71% weekly). The NASDAQ Technology Index (US100) was up 3.34% on Friday (+8.51% on the week). All three indices closed in the plus sign by the end of the week.

On Friday, Fed Member Daley, a usual dovish policy speaker, indicated she supports a 75 basis point rate hike at the Fed’s next meeting in July. At the same time, indicators rebounded significantly, indicating that the scenario of a 0.75% rate hike at the upcoming Federal Reserve meeting has already been priced in. Since there is no new negativity, there are no new factors contributing to the decline. But analysts believe inflation won’t slow down anytime soon, which means the Federal Reserve will raise interest rates more and move faster, putting downward pressure on the economy.

An important factor last week was the drop in oil and commodity prices, which eased inflation fears and allowed stock markets to rebound. Falling commodity prices can help reduce overall inflation, especially during the fall months, reducing the need for strong monetary tightening.

The three-day forum will start on Monday with the main topic “Monetary Policy Challenges in a Rapidly Changing World”. The forum will conclude with speeches by the heads of the Federal Reserve, the European Central Bank and the Bank of England on Wednesday, so investors should keep a close eye on this event.

The second quarter is coming to an end. These six months have already been marked by the fastest rate-raising cycle in decades, market turmoil, and a war that has soared inflation. With investor expectations fluctuating between persistently high inflation and an economic slowdown caused by tough central bank policies in major countries, few believe market volatility will subside anytime soon.

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Stock markets in Europe were trading higher on Friday. Germany’s DAX (DE30) rose 1.59% on Friday (-0.68% weekly), France’s CAC 40 (FR 40) jumped 3.23% (+2.91% weekly), Spain’s IBEX 35 (ES35) rose 1.70% ( + 0.79% (weekly), the British FTSE 100 (UK100) rose 2.68% on Friday (+2.74% weekly).

On Sunday, G7 leaders promised to raise $600 billion in private and government money over five years to fund needed infrastructure in developing countries. Biden said the United States will raise $200 billion over five years in grants, federal funds and private investments to support projects in low- and middle-income countries. It will help fight climate change as well as improve global health, gender equality and digital infrastructure. Europe mobilizes 300 billion euros for the initiative during the same period.

US President Joe Biden and other G7 leaders agreed to announce a ban on new gold imports from Russia. It will be part of a new sanctions package that will be announced on Tuesday.

Asian markets were trading higher last week. Japan’s Nikkei 225 (JP225) is up 1.28% over the week, Hong Kong’s Hang Seng (HK50) is up 3.68%, and Australia’s S&P/ASX 200 (AU200) is up 1.60%.

The People’s Bank of China, along with the Bank for International Settlements and five other regulators, will create a yuan-denominated reserve pool to provide liquidity to member countries during periods of market volatility. China, along with Chile, Indonesia, Malaysia, Hong Kong and Singapore, will contribute at least 15 billion yuan ($2.2 billion) or its equivalent in US dollars to the so-called “renminbi liquidity agreement.” Participating central banks will not only be able to use their contributions if liquidity is needed, but they will also be able to access additional funding through a secured liquidity window. The agreement represents a move by Beijing to internationalize the Chinese currency, which poses a challenge to the global financial system dominated by the US dollar.

Over the weekend, Russia launched new missile strikes on Ukraine’s two largest cities, Kyiv and Kharkiv. Russia has intensified its use of cruise missiles, which mainly target targets in northwestern Ukraine from Belarus. The Kremlin is also seriously considering military action against Lithuania. Last week, Lithuania banned the transportation of sanctioned goods by rail through its territory to Russia’s Kaliningrad region.

Russia is one step away from default. The issue is a payment of about $100 million in government bonds. The grace period for this payment expired on Sunday, June 26th.

In the commodities market, the biggest gains during the week were shown by futures contracts for timber (+5.54%) and palladium (+3.21%). Cotton (-17.25%), corn (-13%), soybean (-10.4%), natural gas (-9.74%), wheat (-9.4%), copper (-6.84%), orange juice (-6.34% Platinum futures contracts (-2.8%) saw the biggest drop.

Main market prices:

S&P 500 (F) (US500) 3,911.74 +116.01 (+ 3.06%)

Dow Jones (US 30) 31,500.68 +823.32 (+2.68%)

DAX (DE40) 13118.13 +205.54 (+1.59%)

FTSE 100 (UK100) 7,208.81 +188.36 (+2.68%)

US dollar index 104.12 -0.31 (-0.30%)

Important events for today:

  • – German retail sales (m / m) at 09:00 (GMT + 3);
  • – US durable goods orders (month / month) at 15:30 (GMT + 3);
  • – US pending home sales (month / month) at 17:00 (GMT + 3);
  • – European Central Bank President in the Eurozone Lagarde speaking at 20:30 (GMT +3).

by just forex

This article reflects a personal opinion and should not be construed as investment advice and/or a continuing offer and/or solicitation to carry out financial transactions and/or guarantee and/or anticipation of future events.

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