The Reserve Bank of Australia aggressively raised interest rates. Labor strike in Norway threatens to disrupt oil and gas production :: InvestMacro

by just forex

Yesterday the United States was a bank holiday due to Independence Day, and the stock exchange was not trading.

European stock markets on Monday traded without a single dynamic. Yesterday, the German DAX (DE30) fell 0.31%, the French CAC 40 (FR40) rose 0.40%, the Spanish IBEX 35 (ES35) lost 0.17%, and the British FTSE 100 (UK100) rose 0.89%.

Turkey’s annual inflation rate has risen to nearly 79%, reaching its highest level in 24 years. Consumer prices have risen significantly due to the Russian-Ukrainian war, rising energy and food prices, and a sharp devaluation of the lira, the national currency. Turkey has experienced rapid growth in the previous years. However, President Recep Tayyip Erdogan has refused to drastically raise interest rates in the past few years to curb inflation, calling interest rates the “mother of all evil.” The result was a sharp depreciation of the Turkish lira and much lower purchasing power. Erdogan has instructed the country’s central bank, of which analysts say it is independent, to cut borrowing rates repeatedly in 2020 and 2021, even as inflation continues to rise. Central bankers who disagreed with this measure were fired. Turkey’s central bank replaced four governors within two years.

Brent oil prices rose yesterday as a strike in Norway threatened to disrupt oil and gas production. The strike is expected to reduce oil and gas production by 89,000 barrels per day, of which gas production will be 27,500 barrels per day. Overall, the demand outlook is also worrisome for investors amid tightening global financial conditions as the US Federal Reserve battles high inflation by rapidly raising interest rates.

Asian markets also traded flat yesterday. Japan’s Nikkei 225 (JP225) is up 0.84%, Hong Kong’s Hang Seng (HK50) is down 0.13%, and Australia’s S&P/ASX 200 (AU200) is up 1.11% on Monday.

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Analysts believe Asian stocks could get a boost on positive economic data and hints of easing Sino-US tensions. The White House will announce some cuts in Chinese tariffs later this week to curb rising inflation and help restore optimism to markets. China’s service sector activity reached its fastest pace in nearly a year, which also lifted investor sentiment.

Analysts at Nomura Bank believe the European Union, Britain, Japan, South Korea, Australia, Canada and the United States are likely to fall into recession over the next 12 months as central banks try to regain control of inflation by tightening policy too much.

The Reserve Bank of Australia raised the interest rate from 0.5% to 1.35%. In his speech, RBA Governor Philip Lowe said the war in Ukraine and strong demand for manufacturing capacity were putting upward pressure on prices. Inflation in Australia is high but slightly lower compared to other leading economies. The Reserve Bank of Australia expects inflation to peak at the end of this year and to return to the 2-3% range next year.

S&P 500 (F) (US500) 3825.33 0 (0%)

Dow Jones (US 30) 31,097.26 0 (0%)

DAX (DE40) 12,773.38 −39.65 (−0.31%)

FTSE 100 (UK100) 7,232.65 +64.00 (+0.89%)

US dollar index 105.19 +0.06 (+ 0.05%)

Important events for today:

  • – Japanese Services PMI (MoM) at 03:30 (GMT +3);
  • – Australian Retail Sales (month / month) at 04:30 (GMT + 3);
  • – China Caixin Services PMI (m / m) at 04:45 (GMT + 3);
  • – RBA rate decision (monthly) at 07:30 (GMT +3);
  • – German PMI for services in the Eurozone (MoM) at 10:55 (GMT +3);
  • – PMI for eurozone services (m / m) at 11:00 (GMT +3);
  • – UK Services PMI (month / month) at 11:30 (GMT +3);
  • – Bank of England Financial Stability Report (monthly) at 12:30 (GMT +3);
  • – Bank of England Governor speaking at 13:00 (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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