Key global markets continue to be primarily affected by the Russia -Ukraine war, the lockdowns in China, inflation, and interest rate hikes.
Government bonds – including Australia and New Zealand’s – sharply declined and US equity futures dropped today, Monday, as inflation and tighter monetary policy affected investors’ sentiment.
The US 10-year yield rose above 2.5%. Japan’s 10-year rate reached 0.25% despite Bank of Japan’s announcement of two unlimited buying operations to maintain them under that level – its highest point allowed.
The yield on the US five-year note soared above the 30-year note, inverting a key part of the Treasury bond curve for the first time in 16 years. This could signal investors could be expecting an economic decline or even a recession as the Fed raises interest rates.
The US dollar rose today morning in Asia while the Japanese yen remained on a downward trend. The yen went down almost 1% hitting a six-year low. The fall came after the Bank of Japan’s (BOJ) intervention to stop bond yields from climbing above its key target.
While BOJ has many times expressed its commitment to keeping monetary policy loose, it offered on Monday to buy an unlimited amount of government bonds with maturities between 5 plus years and 10 years. The BOJ is aiming to stop increasing global interest rates from pushing Japanese yields up.
In another market, the Australian dollar almost reached its previous week’s four-month high boosted by the rising commodity prices and rising Australian bond yields. The Canadian dollar was trading close to its Friday’s two-month peak.
The euro could be affected by key European economies’ inflation figures while the direction of the US dollar could be affected by the release of the non-farm payroll data (NFP) in the US. At the same time, Aussie investors will be expecting the release of the Australian budget.
Global Stock markets
S&P 500 and Nasdaq 100 contracts fell as investors are watching the Russia – Ukraine conflicts closely. In the meantime, most Asian stocks fell except for some Chinese technology shares.
The precious metal was down on Monday morning in Asia as the peace talks between Ukraine and Russian are affecting the safe haven asset’s appeal. A stronger US dollar and higher yields also led the price of gold lower. At the same time, the lockdowns in Shanghai sparked by the latest COVID-19 outbreak in China hit gold purchases in the country also driving its price down.
Bitcoin seems to be on an upward trend. The world’s largest cryptocurrency by market cap was trading at around $47,100 at the time of writing while Ether, the world’s second largest cryptocurrency was trading at around $3,350.
What to Watch out for this Week:
US President, Joe Biden’s 2023 budget release
Bank of England Governor’s speech
Australia’s annual budget
Philadelphia Fed President’s speech
Richmond Fed President’s speech
China manufacturing PMI
China non-manufacturing PMI
OPEC and non-OPEC ministerial meeting for production targets
New York Fed President’s speech
US NFP report