Record monthly drop in indices. China may reduce pressure on tech companies

Last week ended with reports from major tech companies, which should largely determine the future of US indices. Facebook, Qualcomm, Microsoft, and Apple showed positive reports. Google and Amazon showed negative reports. As a result, markets closed last week with a loss. Economic prospects are still overshadowed by concerns about the economic impact of the war in Ukraine, rising bond yields, new coronavirus restrictions in China, which could hinder hamper improving global supply chains, and more aggressive monetary policy tightening by the Federal Reserve. At the close of the stock market on Friday, the Dow Jones Index (US30) decreased by 2.77% (-2.24% for the week, -5.57% for the month), and the S&P 500 Index (US500) lost 3.63% (-2.90% for the week, -9.84% for the month). The technology index NASDAQ (US100) fell by 4.17% on Friday (-3.25% for the week, -15.12% for the month).

April marked the biggest monthly drop in the S&P 500 since the coronavirus pandemic began, while the high-tech Nasdaq recorded the biggest monthly drop since the 2008 financial crisis. The Federal Reserve will almost certainly raise interest rates by 50 basis points (0.5%) this week on Wednesday, the first increase of this magnitude in more than 20 years. And such a move is unlikely to be a peak for the Fed. Analysts forecast a 75 basis point (0.75%) hike at the June meeting.

Statistically, markets tend to trade positive before the upcoming Fed meeting, so investors expect the stock market to rise before the FOMC meeting.

Major European indices traded higher on Friday. Optimistic earnings reports helped the market close the week on the plus side, but April closed the month on the downside. Germany's DAX (DE30) gained 0.84% on Friday (+1.36% for the week, -2.89% for the month), France's CAC 40 (FR40) added 0.39%(+1.28% for the week, -2.94% for the month), Spanish IBEX 35 (ES35) increased by 0.85% (+0.62% for the week and +0.74% for the month), British FTSE 100 (UK100) jumped by 0.47% (+0.30% for the week and -0.19% for the month). Preliminary data indicated that the Eurozone economy showed a decline in economic activity for the first time in 3 months. Statistical office showed that Eurozone GDP grew by 0.2% in the last quarter, while economists were expecting a growth of 0.3-0.4%.

Russia has paid coupons on Eurobonds maturing in 2022 and 2042 in dollars a week before the end of the grace period, as required by the contracts, so the default is canceled.

The Times' British sources in Ukrainian intelligence claim that the Russian Federation has developed clear plans to invade Moldova.

The EU intends to propose that countries impose a total ban on Russian oil by the end of this year and disconnect a number of Russian banks, including Sberbank, from SWIFT. According to preliminary information, EU countries are likely to approve a phased embargo on Russian oil this week.

Gold fell nearly 2% in April, despite rising 1% on Friday. The drop in gold came after the US dollar recorded the largest monthly gain in 10 years. The dollar index increased by 4.6% in April, the highest value since January 2015. Precious metals are inversely correlated with the dollar index and US government bond yields. Buying gold to protect against inflation is only speculative in nature.

Asian markets traded flat last week. Japan's Nikkei 225 (JP225) decreased by 1.29% over the week (-3.20% for the month), Hong Kong's Hang Seng (HK50) gained 3.97% (-6.28% for the month), and Australia's S&P/ASX 200 (AU200) fell by 2.08% (-1.05% for the month). China is scheduled to hold a symposium with the country's major technology companies, which gives hope that Beijing will end extensive regulation of the technology sector. The symposium was scheduled after this year's Labor Day holiday, which runs from Saturday through Wednesday, to reassure business executives that regulators will no longer subject them to strict regulation or impose unexpected fines. That could give a boost to China's technology companies.

At the commodities market, futures on natural gas (+35.93%), orange juice (+23.53%), corn (+11.97%), palladium (+9.53%), gasoline (+7.97%), cotton (+7.22%) and wheat (+4.02%) showed the biggest gains at the month-end. The biggest drop was demonstrated by lumber futures (-13.19%), silver (-7.89%), copper (-7.29%), platinum (-4.21%) and Brent oil (-3.76%).

Main market quotes:

S&P 500 (F) (US500) 4,131.93 -155.57 (-3.63%)

Dow Jones (US30) 32,977.21 -939.18 (-2.77%)

DAX (DE40) 14,097.88 +118.04 (+0.84%)

FTSE 100 (UK100) 7,544.55 +35.36 (+0.47%)

USD Index 103.21 -0.41 (-0.40%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
  • – German Retail Sales (m/m) at 09:00 (GMT+3);
  • – Spanish Manufacturing PMI (m/m) at 10:15 (GMT+3);
  • – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3);
  • – Italian Manufacturing PMI (m/m) at 10:45 (GMT+3);
  • – French Manufacturing PMI (m/m) at 10:50 (GMT+3);
  • – German Manufacturing PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
  • – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3).

by Justforex, 2022.05.02

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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