China's economy is slowing. Global supply chain problems may worsen as Shanghai closes

Last week, investors focused mainly on the US Consumer Price Index. Сonsumer inflation in the US rose to 8.5% year on year, the highest level since 1981. Investors now expect the Fed to be more aggressive with monetary policy. The probability of a 0.5% interest rate hike increased to 80% at the Fed meetings in May and June. Meanwhile, some Fed officials are already calling for a balance sheet reduction after the May meeting. Most Americans are worried about the coming economic recession in the current environment, with 81% of respondents believing it is likely to come this year. At the close of the stock market on Friday, the Dow Jones index (US30) decreased by 0.33% (-0.34% week-to-date) and the S&P 500 index (US500) lost 1.21% (-2.26% week-to-date). The technology index NASDAQ (US100) fell by 2.14% on Friday and ended the week by -3.47%.

The US earning season has begun. Several blue chips from the Dow Jones index (US30) will report this week. Johnson & Johnson, Procter & Gamble, IBM, and American Express are among them. Investors are also expecting reports from streaming giant Netflix and electric car maker Tesla. But it should be noted that American companies are sharply deteriorating their outlook on their reports. The indicators have already reached the 2008-2009 crisis level in terms of corporate sentiment.

Major European indices were trading higher on Friday. German DAX (DE30) gained 0.62% (-0.78% for the week), French CAC 40 (FR40) added 0.72% (+0.75% for the week), Spanish IBEX 35 (ES35) increased by 0.94% (+1.59% for the week), British FTSE 100 (UK100) jumped by 0.47% (+0.86% for the week).

President Putin has signed a law excluding Russian companies from foreign stock exchanges. The law prohibits Russian companies from placing depositary receipts on foreign stock exchanges and obliges them to delist the existing ones.

Russia is still trying to seize Ukrainian territory, shelling peaceful cities and killing civilians. Putin wants to continue the war and is in no hurry to meet with Vladimir Zelensky, Italian Prime Minister Mario Draghi said after a telephone conversation with the Russian president.

Bulgaria and Estonia have banned Russian ships from entering their ports. The ban also applies to ships that changed their flag after February 24. Earlier Italy, Romania, and Belgium closed their ports to Russia.

The oil market is still in a difficult situation. The European Union has begun developing a plan for phasing out Russian energy resources. The EU accounts for 25% of oil and 40% of gas from Russia. Germany consumes the most, receiving 34% of its oil from Russia. It is impossible to replace such volumes in the short term. Everyone understands this, so a step-by-step abolition is needed. The process is also being delayed due to the presidential elections in France, where the second round will take place on April 24. Incumbent President Emmanuel Macron has a better chance of re-election, but his rival Le Pen has a very slight lead. At the same time, Le Pen supports Putin's policies and intends to withdraw France from NATO if she is elected president.

Asian markets were trading higher last week. Japan's Nikkei 225 (JP225) added 0.80% for the week, Hong Kong's Hang Seng (HK50) increased by 0.67% last week, and Australia's S&P/ASX 200 (AU200) was up +0.59% for the week. China's GDP rose last quarter, but China's industrial economic numbers slowed in March due to a severe blow to consumption, real estate, and exports. The labor market is already showing signs of stress in March, which is usually a resilient month. China's nationwide unemployment rate, which was 5.8% in March (the previous 5.5%), is the highest since May 2020. The biggest short-term challenge for Beijing is the coronavirus-related restrictions amid heightening geopolitical risks that increased pressure on supply and commodity prices. Blocking large cities such as Shanghai is very expensive. The number of ships near Shanghai ports is enormous. Analysts predict a deterioration in the supply chain.

In the commodities market by the end of the week futures on natural gas (+16.61%), Brent oil (+8.64%), WTI oil (+8.43%), orange juice (+8.18%), gasoline (+7.71%), cotton (+6.37%), wheat (+4.21%), silver (+4.16%) and corn (+2.89%) showed the biggest gains at the end of the week. Lumber futures (-7.12%), coffee (-3.61%) and palladium (-3.06%) showed the biggest drop.

Main market quotes:

S&P 500 (F) (US500) 4,392.59 -54.00 (-1.21%)

Dow Jones (US30) 34,451.23 -113.36 (-0.33%)

DAX (DE40) 14,163.85 +87.41 (+0.62%)

FTSE 100 (UK100) 7,616.38 +35.58 (+0.47%)

USD Index 100.50 +0.18 (+0.18%)

Important events for today:
  • – China GDP (q/q) at 05:00 (GMT+3);
  • – China Industrial Production (y/y) at 05:00 (GMT+3);
  • – China Unemployment Rate (m/m) at 05:00 (GMT+3);
  • – US FOMC Member Bullard Speaks at 23:00 (GMT+3);
  • – New Zealand RBNZ Gov Orr Speaks at 23:00 (GMT+3).

by Justforex, 2022.04.18

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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