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December 2. In focus: OPEC meeting and the Fed's «Beige Book»

At the end of yesterday's trading session, the US stock market fell sharply after US health officials announced the discovery of the first confirmed case of omicron, a strain of coronavirus, in the country.

What will affect the dynamics of the market today?

First, we should pay attention to General Motors, which announced yesterday the creation of a joint venture with South Korean Posco Chemical Co Ltd to build a plant in North America. The plant will process critical materials for batteries for the GM Ultium electric vehicle platform.

As you know, General Motors has recently decided to gradually switch to electric vehicles, and collaboration with South Korea will help the company take control of the supply chain. Analysts of the automaker expect that for the full year profit before tax will reach about $ 14 billion, which is higher than previously forecast (from $11.5 to $13.5 billion).

Further, the results of the two-day OPEC meeting will be of interest. Today, the cartel will meet to make a decision on production in January, after the participating countries agreed to gradually increase the supply on the market.

The Joe Biden administration, which has been pressing OPEC to increase production, said it could adjust the timing of the planned release of strategic oil reserves. However, only if world energy prices fall significantly.

The Federal Reserve's Beige Book was published last night. According to her thesis, the US economy continues to be under pressure due to supply chain disruptions, labor shortages and inflation. At the same time, enterprises managed to raise prices to compensate for price pressure against the background of high consumer demand.

December 1. FED announced plans to accelerate taping

Chairman of the US Federal Reserve Jerome Powell said that at the December meeting of the Open Market Committee, the timing of the completion of the bond purchase program will be discussed. The regulator may complete the program several months ahead of schedule, given the good state of the economy, the shortage of workers in the labor market and high inflation.

Such a «hawkish» tone of Powell's comments took market participants by surprise, and also somewhat cooled the rally of US Treasury bonds. Stock indexes also rushed down: the S&P 500 index fell to 4,567.00, the Dow Jones fell to 34,483.72, and the NASDAQ – to 15,537.7.

Recall that in November, the Fed began to reduce $120 billion in monthly purchases of Treasury bonds and securities at a pace that would allow it to complete the winding down by mid-2022. Recently, an increasing number of Fed representatives have been advocating the end of asset purchases in the spring of next year. They are confident that this option will allow them to start raising key rates earlier, if the situation with rising inflation requires it.

Powell notes that the current inflation rate is twice the Central Bank's flexible target of 2%. And if earlier it was possible to apply the term «transitory issue» to high inflation, now this is no longer the correct definition for current levels.

Stock markets rebound as risk-on mood returns

Risk sentiment returns to the markets. After being gripped by the uncertainty surrounding the new virus strain for the past couple of weeks, the markets finally breathed a sigh of relief.

US chief infectious disease expert Anthony Fauci recently told CNN that so far the Omicron strain does not pose a serious threat to the population. However, analysts at ING, the largest banking group in the Netherlands, still urge investors to stay alert: "Although the markets are already tired of the news about Omicron, this does not reduce the danger of a new strain for both the population and the global economy."

Fauci's encouraging announcement brought risk sentiment back to the markets. As a result, global stock indicators jumped sharply on Tuesday as traders shifted their attention from safe-haven currencies and bonds to riskier assets. Thus, the demand for the shares of companies that are directly or indirectly related to the tourism sector began to rise again. At the same time, pharmaceutical companies involved in the production of vaccines have faced some selling today.

The shares of Norwegian Cruise Line Holdings Ltd (up 9.51%), Royal Caribbean Cruises Ltd (up 8.2%), American Airlines Group (up 7.9%), and others were on the rise today. Meanwhile, Pfizer (down 5.1%), Moderna (down 13.5%), BioNTech (down 18.7%), and AstraZeneca (down 1.67%) went into negative territory.

For the first time since February, the FTSEurofirst 300 index had added almost 1% by the time the article was published. European stocks were also gaining ground, with Germany's DAX trading higher by 2.10%, France's CAC 40 rising by 2.35%, and Britain's FTSE 100 adding 1.19%. The US dollar was growing against the Japanese yen, and even the Australian dollar was in high demand. This market recovery was possible thanks to Dr. Fauci and his positive statement.

Also on Monday, China's central bank was reported to make another attempt to stimulate its economy first time since July. The Chinese regulator is going to fulfill its plan by reducing the amount of cash held in bank reserves.

Diversified Chinese investment holding Evergrande is currently on the brink of a crisis, thus maintaining uncertainty in the real estate sector in China. However, based on the strong imports data of China's largest real estate operator, there is strong domestic demand in the country today. Evergrande shares jumped by 1.7% from yesterday's record low.

Australia's S&P/ASX200 was up by 0.95% today, while Japan's Nikkei increased by 2.1%. The main Asian index MSCI (excluding Japan) was down by about 5% this year. Hong Kong markets are showing the biggest losses, while India and Taiwan stocks look more profitable.

The US stock indices were also showing rapid growth at the beginning of the trading session. The Dow Jones Industrial Average increased by 1.23%. The Standard & Poor's 500 Index climbed by 1.79%, and the Nasdaq Composite jumped by 2.45%.

December 15. Three world central banks will hold their meetings this week

This week, three meetings of the world's largest central banks will be held – the US Federal Reserve, the European Central Bank and the Bank of England.

US Federal Reserve

Market participants expect that the US Federal Reserve will announce a faster phasing out of economic stimulus and an earlier start of a new cycle of interest rate hikes. Consensus forecasts suggest that the volume of asset purchases by the Fed will decrease from $120 billion per month to zero no later than the end of March.

Such a move will pave the way for further interest rate increases in the middle of next year. In addition, the main reason for such measures of the regulator is the off-scale inflation in the United States: it is at the highest level since 1982 (6.8%). Moreover, producer prices are also growing at the highest rate in the last decade.

Previously, analysts assumed that the bad statistics were just the result of the distorting base effect of the previous year.

ECB

The European Central Bank will have to face for the first time the question of whether it should re-introduce some formal restrictions on the purchase of bonds. The term of the «Emergency Procurement Program in case of a pandemic» expires at the end of March 2022, and supporters of the «hawkish» policy of the regulator seek to restore some restrictions on the purchase of bonds.

However, many analysts assume that the ECB will buy bonds worth 40 billion euros per month until the end of next year, and a rate increase is not expected until 2023.

The regulator notes that it can afford to take its time with changes in monetary policy, since inflation in the region is not as high as in the United States, and the shortage of labor is still quite acceptable.

Bank of England

The Bank of England will have to choose between letting inflation expectations get further out of control, or raising interest rates just at a time when a new wave of coronavirus is slowing the economy.

The appearance of a new strain of omicron in the country led to some tightening of quarantine rules in the country and allowed representatives of the British regulator to take a break and observe the development of events before moving on to «hawkish» rhetoric. And this is despite the fact that annual inflation in the country exceeded 5% in November.

December 14. Price growth in Sweden has broken a record

According to Statistics Sweden, inflation in the country in November reached its highest in almost 30 years amid rising electricity and fuel prices.

It is noted that the inflation rate, according to the change in the consumer price index over the last 12-month period, amounted to 3.6% in November compared with 3.1% in October. The last time such figures were recorded was in December 1993.

At the same time, it is possible that in December the inflation growth may be even more significant and it may approach 4%. But in 2022, according to experts, this indicator should decrease.

Analysts specify that the contribution of energy resources amounted to about 1.8 percentage points, which corresponds to almost half of the inflation rate in November 2021.

As we know, the European Union has faced a significant increase in gas prices, which has led to an increase in the price of electricity. And this, in turn, puts pressure on consumers and the economy. Low gas levels in storage facilities before the start of the heating season were also one of the reasons for the increased prices.

December 20. The Turkish Lira has updated the anti-record again

On Monday, the Turkish lira exchange rate collapsed again, updating another anti-record. The quote of the USD/TRY pair is 18.41 lira per dollar. During the day, the currency lost about 10%.

Back in January 2021, the lira was trading at the rate of 7.4 lira per dollar. During the year, the currency has fallen in price by more than 60%, and the lira has lost more than 40% of its value over the past month.

The driver of the weakening of the lira was another reduction in the interest rate by the central bank of Turkey. On Thursday, the Central Bank decided to reduce the discount rate from 15% to 14%. The regulator also announced new direct currency interventions.

Turkish President Tayyip Erdogan is in favor of reducing the discount rate, arguing that this will lead to lower inflation. However, many do not agree with Erdogan's policy. As a result, since July 2019, the president has already changed the head of the central bank three times and the finance minister twice since November 2021.

December 22. Oil prices rose sharply amid the energy crisis in Europe

Yesterday, oil prices showed a steady increase against the background of the energy crisis in Europe: the cost of gas in the region overcame another historical maximum at $2,187 per thousand cubic meters. And in such conditions, the demand for petroleum products will inevitably grow.

On Wednesday morning, Brent oil quotes settled at $73.91 per barrel. Yesterday's daily high was marked at $74.57. North American WTI crude oil rose to $71.78 per barrel.

Additional support for the oil market was provided by yesterday's data from the American Petroleum Institute (API), according to which crude oil reserves in the United States decreased by 3.67 million barrels. Today, we should pay attention to a similar report from the US Department of Energy, and if official data also confirm a reduction in raw materials stocks – this will be the fourth week of decline in a row.

Analysts and market participants also continue to monitor the situation with the emergence of a new omicron strain of coronavirus. Experts fear that the new strain carries even greater risks for global oil demand than its predecessors. «Any threat of falling demand will contribute to investors avoiding risks and outflow of funds from energy markets,» experts say.

December 27. Great Britain faces a serious energy crisis

Analysts do not exclude that the UK will face a worsening economic situation due to gas prices, similar to what happened during the 2008 financial crisis.

Stephen Fitzpatrick, chief executive of OVO Energy, the nation's second-largest energy supplier, compared the current state of affairs to the period between the collapse of the Northern Rock bank and the collapse of Lehman Brothers a year later.

The current crisis is not expected to end soon. Moreover, Fitzpatrick accused the British authorities of being too slow in finding suitable solutions to break the impasse.

The UK government itself said it was in constant contact with representatives of the energy industry, and promised to protect consumers from rising prices.

Among the main causes of the energy crisis in Europe are unfavorable weather, inefficient operation of wind farms this year and insufficient gas reserves in underground storage on the continent. Britain also believes that Russia was the culprit in the crisis in Europe, but Moscow has denied the allegations. He pointed out that the European Commission itself insisted on the market pricing of the energy carrier, which ultimately led to the crisis.

January 4. Prospects of the precious metals market

In 2021, everything except precious metals rose in price: oil jumped in price by 55%, copper increased by 25% over the year, and inflation in the United States reached a 40-year high of 6.8%. At the same time, gold not only did not grow, but also lost about 4% in price over the year.

In fact, there is quite a logical explanation for this. The gold market is under pressure from the tightening of monetary policy by the US Federal Reserve. Market participants fear that the beginning of a cycle of interest rate increases will inevitably play against gold. Which leads to the fact that the market begins to look for more profitable instruments.

Many investment banks have already submitted their forecasts for 2022. In particular, JPMorgan expects an average gold price of $1,630 per ounce in 2022. Deutsche Bank is more conservative and expects $1,750 at the end of the year. The current price of an ounce of precious metal is $1808.

However, there are also those who hold more positive views on the dynamics of gold, expecting its value in the new year at the level of $ 2000-2100 per ounce. Investors believe that the «fashion» for risky assets will not always be relevant, so when gold becomes a sought-after asset again, its value can easily grow by 15-20%. Especially after a bad year.

There are many reasons that can change the vector of the direction of gold: there is an out-of-control inflation, new Covid strains and restrictions, as well as geopolitics and general tension in the world.

January 3. What awaits the oil market in the new year

During the first trading day of the new year, the oil market demonstrates a multidirectional movement, first continuing the decline that began at the end of the past year, and then sharply jumping up. The current Brent quote is $78, WTI oil is trading at $75.38 per barrel.

The pressure on prices is exerted by the continuing concern of the market about the fall in demand due to the new strain of the omicron coronavirus. At the same time, analysts note that due to mass vaccination in 2021, the threat of Covid in the world has significantly weakened, and by the end of 2021, Brent has grown by 34%, and WTI – by 38%. The growth was mainly due to the gradual lifting of restrictions on air travel and tourism and, accordingly, the growing demand for oil.

Predicting the movement of the oil market in 2022, analysts note that the periodic appearance of new strains of coronavirus may cause the resumption of lockdowns and restrictions in certain countries and sectors of the economy. Therefore, the oil market situation in the new year will not be too stable, and the market is waiting for sharp price fluctuations.

Another risk for the oil market in 2022 may be an increase in oil production in the United States. According to the IEA forecast, the supply of oil will also increase sharply in Canada and Brazil, and this will mean that there will be an excess supply of oil in the market of 2 million b/d, of which 1.1 million b/d will be for oil production in the United States.

Tomorrow, January 4, a regular meeting of the ministers of the OPEC+ member countries will be held, at which the parameters of the implementation of the current agreement on increasing oil production by 400 thousand barrels per day will be discussed, and quotas for January will also be set. Most likely, they will remain unchanged – the same as in December 2021. However, if the threat of new, more dangerous Covid strains persists, OPEC+ may temporarily suspend production increases due to uncertainty about future oil demand.

For 2022, we predict that the price of Brent oil will move on average in the range of $65-$90 per barrel, and during the first quarter of 2022 – in the range of $69-79 per barrel.

January 10. Wall Street futures decline in anticipation of further inflation in the US

Monday began with a decline in futures on major US stock indexes. Pressure on the market is exerted by the expectations of statistics, which should confirm the continued acceleration of consumer price growth in the United States.

In particular, futures for the Dow Jones Industrial Index (DJIA) declined by 0.02% to 36102 points, futures for the S&P 500 broad market index – by 0.11% to 4662.75 points, and the NASDAQ high–tech index – by 0.29% to 15536 points.

Consumer price statistics in the United States will be published on Wednesday. Analysts suggest that last year's inflation was 7%, which will be the highest since 1982. A month earlier, annual inflation in the United States reached 6.8%.

Experts note that the stronger-than-expected growth in average wages in the country reinforced the inflation expectations of investors. If the forecasts turn out to be correct, the US Federal Reserve will have to start raising the discount rate earlier than planned.

However, the tightening of monetary policy is unfavorable for nominal stock prices. High-tech companies, whose value depends more on future profits (which, in turn, is closely related to «cheap» money in the economy), may suffer the most. Therefore, NASDAQ futures are getting cheaper more significantly than other indices.

January 12. The first bitcoin transaction is 13 years old

Exactly 13 years ago, on January 12, 2009, the creator of bitcoin under the pseudonym Satoshi Nakamoto made the first transaction in cryptocurrency, sending 10 BTC to cryptographer Hal Finney. Hal Finney played a crucial role in the history of bitcoin, and according to one version, he was the creator of the cryptocurrency. Since then, 700 billion transactions have been made.

The first BTC transaction was confirmed in block #170. The cost of the cryptocurrency received by Finney was almost zero. According to him, the cryptographer extracted several blocks on his own personal computer. Since then, cryptocurrency mining has become an industry in which specialized high-performance devices are used, and the hashrate of the network exceeds 170 EH/s.

However, currently, the solo mining of cryptocurrencies continues. Yesterday, an unknown miner with an equipment capacity of 126 TH/s included block #718124 in the blockchain. Experts note that the probability of this event was less than 0.0001%. The anonymous miner received a reward of 6.25 BTC. As you know, in 2009, 50 BTC was charged for the extracted block, but this figure is halved approximately every four years.

In December 2021, miners mined 90% of bitcoin. Analysts note that the cryptocurrency is expected to reach the issue limit of 21 million coins in 2140.

January 17. Oil jumped to a three-year high

The price of Brent crude oil on Monday jumped sharply to a three-year high at $86.69 per barrel. The cost of a barrel of North American WTI oil has risen to $84.09 (the maximum since November 10, 2021).

The main support for the oil market is provided by expectations that supply will remain limited against the background of curbing production by major producers, and global demand will not suffer from a wave of infections with the Omicron coronavirus strain.

Analysts note that bullish sentiment persists, as OPEC+ does not provide sufficient supply to meet high global demand. And if investment funds increase the share of crude oil, prices may reach 2014 highs.

Experts are also confident that a summer surge in demand is inevitable ahead, especially in Europe and the United States, which may be greater than last year (if the hopes that Omicron will finally turn the Covid-19 pandemic into an epidemic are justified).

However, during the day, Brent quotes declined slightly, to the level of $85.60 per barrel, amid an increase in production in Libya. According to the National Oil Corporation of the country, the total volume of oil production has returned to the level of 1.2 million barrels per day. Recall that last week production in Libya was about 900 thousand barrels per day due to the blockade of western fields.

January 14. European stock exchanges decline on Friday

According to Friday's trading data, Europe's main stock indexes are declining after the release of data on the first monthly trade deficit in the eurozone in almost eight years. A similar indicator in the UK, which is now not part of the euro area, is fixed at almost zero.

The German DAX index declined during the day to 15,833.73 points, the French CAC 40 – to 7,119.01 points, the British FTSE 100 – to 7,523.02 points.

European macro statistics exerted pressure on the stock market. Thus, the deficit of the foreign trade balance of the eurozone countries in November amounted to 1.5 billion euros after a surplus of 3.6 billion in October. At the same time, analysts expected a surplus of 7.6 billion euros. The European statistical Agency Eurostat also noted that the trade deficit was recorded for the first time in a month since January 2014.

It is also worth noting that the stock markets of Europe repeat the dynamics of the American and Asian ones, which closed mainly in the red (due to news about the deterioration of the epidemiological situation in these countries).

January 24. Bitcoin skids to a 6-month low

During Monday's trading session, the bitcoin exchange rate continued the fall, which began at the end of last week. The current quote of the cryptocurrency is $33.483. The last time such price values were recorded a half year ago, in July 2021.

Since the beginning of the week, bitcoin has lost about 9%. Analysts say the main reason for the fall is the decline in the value of shares of the largest technology companies. In particular, the head of Tesla, Elon Musk, lost $25.1 billion, the head of Meta (former Facebook), Mark Zuckerberg, became poorer by $ 10.4 billion, and Changping Zhao, the owner of the Binance cryptocurrency exchange, lost $17.7 billion.

In turn, the reason for the decline in the securities of technology giants was the widespread spread of the omicron strain, as well as the prospect of lower interest rates in the United States and the growth of instability in the world. At the same time, the main pressure on the crypto market was caused by fears of a military conflict between Russia and Ukraine – recently it became known that the United States and Great Britain began to withdraw diplomatic representatives from Ukraine.

Many analysts predict a further decline in the value of the most popular cryptocurrency – up to $ 20 thousand.

January 26. The US will release another 13.4 million barrels of oil from strategic reserves

The US Department of Energy has announced plans to release an additional 13.4 million barrels of oil from the country's strategic reserves.

The release of reserves will be distributed among seven companies: Shell will buy 4.2 million barrels, Trafigura – 3 million, Phillips 66 Company – 2.3 million, Macquarie Commodities Trading – 2 million, Chevron – 0.885 million, ExxonMobil – 0.515 million and BP Products North America – 0.5 million barrels.

Recall that US President Joe Biden in November 2021 announced the release of 50 million barrels of oil from reserves due to high oil prices in the world and gasoline in the States themselves. The first deliveries were made in December, and the rest will be carried out gradually until April. The return of reserves to the strategic reserve is planned for 2022-2024.

Today, oil quotes are showing growth again. The current Brent quote is $88.00 per barrel. Raw materials are getting more expensive after the release of yesterday's report from the American Petroleum Institute (API), according to which stocks decreased by 872 thousand barrels after rising by 1.4 million barrels a week earlier.

Today, we should pay attention to similar statistics from the US Department of Energy. Experts expect that oil reserves in the country decreased by 2.1 million barrels last week, gasoline reserves increased by 2.2 million barrels, and distillate reserves decreased by 1.6 million barrels.

February 1. Gold is rising on Tuesday morning on political tensions

The value of gold is steadily growing on the first day of February. The current quote of the precious metal is $1.803 per ounce. Analysts call the main reason for the growth of the asset the strengthening of foreign policy tensions in the international arena caused by the contradictions around Russia and Ukraine.

And since gold is a «safe haven asset», increased tension successfully supports demand for it, somewhat leveling the recent weakening from the $1.850 level due to the tightening of the monetary policy of the US Federal Reserve System. Traditionally, gold acts as a resource that investors prefer to acquire in the event of difficult and questionable situations.

The markets are also focused on the meetings of the European and British central banks on Thursday. If both regulators agree to increase interest rates, the demand for national currencies will grow, and for the precious metal will decrease.

Analysts also presented a report on the global demand for gold by the end of 2021. According to statistics, demand reached the level of 4,021 tons, which was facilitated by a 50% growth in the fourth quarter. In annual comparison, the indicator increased by 10%. It is noted that such indicators are caused by the recovery of the jewelry and technology sectors of the industry, as well as active purchases of gold from central banks.

January 31. Oil remains near highs at the beginning of a new trading week

On Monday, oil prices remained stable at $89 per barrel after jumping to seven-year highs last week.

The current Brent quote is $88.90, North American WTI oil is trading near $87.30 per barrel.

Both brands of oil rose in price for the sixth week in a row. Since the beginning of the year, their cost has risen by about 16%, while the growth rate at the end of the month may be the highest since February 2021.

The main support for commodity assets is provided by concern due to problems with oil supplies, coupled with continuing geopolitical risks. An additional growth factor was a sharp cold snap in the United States, which increases the demand for fuel.

This week, on February 2, an important event for the oil market will take place – a meeting of OPEC+ ministers. Market participants expect that the alliance countries will decide to continue to increase their total production by the planned 400 thousand barrels per day on a monthly basis.

February 3. The Bank of England may raise the key rate for the second time in a row

A regular meeting of the Bank of England will be held today, at which, as expected, the regulator may raise the key rate for the second time in a row – from the current 0.25% to 0.5%, against the background of record inflation in the UK for 30 years. The last time the British Central Bank raised rates at two meetings in a row was in 2004.

It is worth noting that consumer prices in the UK in December 2021 jumped by 5.4% compared to the same month of the previous year, showing record growth rates since March 1992.

The British regulator raised the rate in December last year to 0.25%. At the same time, the Bank of England became the first among the world's central banks to take such a step, noting that some moderate tightening of monetary policy will be necessary to achieve the 2% inflation target.

In addition, in December, the Central Bank decided to leave unchanged the volume of the asset repurchase program at the level of 895 billion pounds, including the repurchase of government bonds in the amount of 875 billion pounds. However, it is possible that today the Bank of England will stop all reinvestments in the framework of asset purchases.

According to experts, the main message of the British regulator will be that a moderate tightening of monetary policy is necessary to maintain the stability of the economy. They also expect that inflation may peak at 6.5% and will slow down for a longer time than previously expected, remaining above the 2% target for two years.

February 8. Gold is getting cheaper on the expectation of a faster Fed rate hike

On Tuesday, the price of gold was declining as the US dollar rose in anticipation of inflation statistics. Investors predict that the Federal Reserve will signal an aggressive tightening of monetary policy and multiple interest rate hikes this year.

The spot price of precious metals in the morning declined to $1816 per ounce, recovering during the day to $1820.

Inflation data in the United States will be published on Thursday. The consumer price index for January is expected to show an annual growth of 7.3%, which would be the highest jump since 1982. And as experts note, high inflation may force the Fed to tighten policy faster, which will lead to an increase in the opportunity costs of owning non-profitable gold.

Additional support for gold is provided by the ongoing tensions around Russia and Ukraine, as the precious metal is used as a safe haven asset.

As for the other metals, palladium fell today to $2200, silver declined to $22,777, and platinum fell to $1004.25 per troy ounce.

February 11. The US stock market fell on inflation data

US stock indexes fell sharply after the publication of statistics on inflation in the United States.

According to the Ministry of Labor, consumer prices (CPI) jumped 7.5% in January compared to the same month in 2021, which was a record inflation rate since 1982. In December last year, the growth rate of consumer prices accelerated by 7%.

After the release of the data, the yields of American government securities jumped sharply. The interest rate of ten-year US Treasuries has risen above the 2% mark for the first time since 2019.

The stock market did not stand aside either: indicators of all 11 S&P 500 industry groups ended trading in the red on Thursday, the subindex of technology companies most sensitive to interest rate hikes fell by 2.1%. The value of Qualcomm Inc. shares decreased by 5.3%, Advanced Micro Devices Inc. – by 5.3%, Adobe Inc. – by 5.1%, Apple Inc. – by 2.3%.

The Dow Jones Industrial Average index fell by 526.47 points (1.47%) to 35241.59 points by the close of the market on Thursday.
The Standard & Poor's 500 declined by 83.1 points (1.81%) to 4504.08 points.
The Nasdaq Composite lost 304.73 points (2.1%) to 14,185.64 points.

Analysts expect that high volatility in the stock market will continue until the March Fed meeting, at which the key rate is likely to be increased.

February 15. Japan's GDP growth was 5.4%, worse than forecast

In the fourth quarter of 2021, Japan's economy grew by 5.4% compared to the same period in 2020. Experts expected the growth to be 5.8%.

The quarterly growth of the Japanese economy in October-December amounted to 1.3% compared to the previous three months – and this was the maximum growth rate for the year. Analysts had forecast the figure at 1.4%.

In the third quarter, according to the revised data, the volume of GDP decreased by 0.7%, and not by 0.9%, as previously reported.

Business investment in the last quarter increased by 0.4%, exports increased by 1%, imports decreased by 0.3%. Government spending decreased for the first time in 3 quarters – by 0.3%.

Experts note that despite the fact that the Japanese economy returned to growth in the last quarter of last year, the increase in the incidence of Covid-19 in the first quarter of this year is likely to limit further recovery.

It is noted that the expansion of the Japanese economy in the fourth quarter is mainly due to an increase in consumer spending by 2.7%. Costs have increased as the lifting of quarantine restrictions in Tokyo and other cities of the country since September 30 has led to a sharp increase in demand for services. It is also worth noting that in the current quarter, new quarantine measures were re-introduced, as another spike in morbidity is observed in the country.

February 17. Oil prices are highly volatile on news of negotiations with Iran

On Thursday, the price of oil accelerated its decline amid expectations that the United States and Iran will soon be able to return to a nuclear deal that will allow Iranian oil to come back to the world market.

April Brent futures declined during the day to the level of $91.40 per barrel, recovering later to $93.35. WTI crude oil fell to $90.30, also recovering during the day to $93.15 per barrel.

Yesterday it became known that the parties in the negotiations on the nuclear program are «closer to an agreement than ever.» This was stated by the chief negotiator from Tehran, Ali Bagheri Kani, on Twitter.

In addition, Iran and South Korea held a meeting of representatives of oil refining companies to discuss possible supplies, which suggests that Iran is definitely preparing the ground for a return to the market.

Experts note that the positive dynamics of negotiations between the United States and Iran somewhat calms the oil market. And although there is no agreement yet, prices are declining on the news of progress in negotiations and expectations of a potential return to the oil market in the amount of up to 900 thousand barrels per day by December.

At the same time, today oil prices are supported by another increase in geopolitical tensions due to the situation on the Ukrainian border. The White House said yesterday that Russia had increased the concentration of troops on the border by an additional 7 thousand people.

February 24. Brent exceeded $101 on the news about the military operation in Ukraine

On Thursday morning, the price of benchmark oil is steadily rising amid the escalation of the military situation in eastern Ukraine.

In particular, April Brent futures rose today to $101.27 per barrel, updating the highs since September 2014. Futures for North American WTI crude oil rose to the level of $96.84 per barrel.

Today it became known that Russian President Vladimir Putin announced the decision to conduct a special military operation in connection with the situation in Donbass in order to protect the residents of the DPR and LPR. President of Ukraine Volodymyr Zelensky, in turn, announced the introduction of martial law throughout the country.

Experts note that the military conflict significantly increases the risks of interruptions in Russian oil supplies and the introduction of diverse sanctions. At the same time, the US authorities announced that they are considering the option of re-selling oil from the country's strategic reserves (SPR) if prices for these energy resources rise sharply «as a result of Russian aggression.»

At the end of 2021, the United States already resorted to selling oil from the SPR (about 70 million barrels). This was done in coordination with other major players in the market.

March 1. Oil continues to rise in price

The price of oil continues to rise on Tuesday amid the continuation of military operations on the territory of Ukraine. Prices are increasing, even despite reports from the United States about the further release of oil from strategic reserves.

As it became known, the United States and other members of the International Energy Agency (IEA) may soon decide to release about 70 million barrels of oil from reserves. An emergency meeting of the organization will be held today.

However, analysts believe that any release of oil from reserves will only be a short-term solution, especially if the supply of raw materials from Russia decreases. Warren Patterson, who is responsible for commodity markets strategy at ING Groep NV, said that it is unlikely that today's market expects a significant change in Russian exports, which suggests the likelihood of an even greater price increase in the event of a deterioration in the situation in Ukraine.

The current Brent quote is $100.17 per barrel. The price of WTI oil futures is hovering around $97.40 per barrel.

February 28. China does not intend to stop trade cooperation with Russia

The Ministry of Foreign Affairs of China has announced its intention to continue mutually beneficial trade cooperation with Russia.

The country has no plans to join the Western sanctions imposed in response to Russia's special operation in the Donbas. The United Kingdom, the European Union, the United States and Canada have imposed sanctions against Russia aimed at Russian banks, members of the State Duma who supported the recognition of the DPR and LPR, some businessmen, as well as personally against Vladimir Putin and Russian Foreign Minister Sergei Lavrov.

In addition, the European Union has closed its airspace to Russian aircraft and banned aircraft from landing, taking off or flying over the territory of the Union.

The EU has also decided to prohibit operations related to the management of reserves and assets of the Central Bank of Russia, including transactions with any legal entity, organization or body acting on behalf of or on behalf of the Central Bank.

China has stated that it opposes unilateral sanctions that are not based on international law. In addition, the PRC demanded that the United States not harm the legitimate rights and interests of China and other parties in resolving the Ukrainian issue.

March 11. Gold is getting cheaper as international tensions decrease

At the end of the week, gold shows a decline of more than 1% amid the weakening of geopolitical international tensions.

The current price of the April precious metal futures on the New York Comex exchange is $1981 per ounce. May silver futures fell to $26,117 per ounce.

The world stock and commodity markets today react mainly to the statement of Russian President Vladimir Putin that there are certain positive developments in negotiations with Ukraine. He stated this at today's meeting with his Belarusian counterpart Alexander Lukashenko.

Traditionally, gold is used by investors as a safe haven asset, and on such positive news, many market participants began to switch to riskier instruments. Analysts note that the advantage of gold at the current level of foreign policy risks is rapidly decreasing.

At the same time, experts suggest that the sanctions imposed against Russia in the near future may further affect supplies, which will push commodity assets to growth.

March 10. Inflation in the US has updated the maximum in 40 years

According to the US Department of Labor, annual inflation in the country accelerated to 7.9% in annual terms by the end of February and reached its highest since 1982.

Last month, inflation increased by 7.5%. On a monthly basis, consumer prices rose by 0.8%.

The annual figure is still at the records of forty years ago, now it is the highest since January 1982. The value of January was a record since February 1982.

The indicators in annual and monthly terms coincided with analysts' forecasts.

It is worth noting that core inflation in the United States (excluding food and energy prices) for the year was 6.4%, and for February – 0.5%.

Food prices in the United States rose by 1% in February, energy prices rose by 6.7%. Over the year, food has risen in price by 7.9%, and energy – by 37.9%.

March 16. Economist named three signs of the end of dollar dominance

Economist Henrik Müller said that the US dollar may lose its status as the world's main currency. Doubts about the happy future of the US dollar are caused by several factors at once. Let's consider the main ones.

First, inflation can seriously damage international confidence in the dollar and shake investor confidence in the value of the US currency. Müller stressed that the current inflation in the United States is at the level of 8% (and this is not the limit), and the further development of the situation depends on the actions of the Federal Reserve System.

Anti-Russian sanctions may also have a negative impact on the dollar. To date, the most serious measure against Russia is the freezing of Moscow's foreign exchange reserves in other central banks. Up to this point, such a step had never been taken in this form before. And if fears spread that Washington may confiscate foreign currency assets of other countries at any moment, the dollar may come under extreme pressure.

And the situation in Ukraine itself does not bode well for the dollar in the long term. As events unfold, the balance of forces in the financial market is changing – along with the global financial institutions of the United States, new blocs from sovereign countries with fragmented markets appear and strengthen their influence.

March 18. India has increased the import of Russian oil by 4 times

Analysts note that Russian oil exports to India increased fourfold in March, which indicates a redistribution of global energy flows after the situation around Ukraine.

India, which is the third largest country in the world in terms of energy consumption, bought several batches of oil at once, as buyers from Europe refused Russia's resources due to sanctions. In particular, the Russian Federation exported 360 thousand barrels per day to India in March, which is almost 4 times more than last year.

The United States reacted negatively to such actions: White House spokeswoman Jen Psaki said that India could be on the verge of a historical past if it buys Russian oil. At the same time, Psaki admitted that these purchases would not violate US sanctions.

Last week, Russian Deputy Prime Minister Alexander Novak, during a telephone conversation with Indian Oil Minister Hardeep Singh Puri, discussed further cooperation and joint areas of work in the fuel and energy sector. At the moment, Russian exports of oil and petroleum products to India have approached $1 billion, and representatives of the countries hope for an effective increase in this indicator.

The Indian authorities said they are developing a mechanism for buying and selling raw materials in rupees and rubles, which will significantly facilitate trade after Western restrictions on international currency transfers to and from Russia.

March 23. Annual inflation in the UK has reached its highest since 1992

According to the report of the National Statistical Service of the United Kingdom, the consumer price index in February in the UK showed an increase of 6.2% compared with 5.5% in the previous month. This was the highest figure in the last 30 years. On a monthly basis, consumer prices rose by 0.8% after falling by 0.1% in January.

Analysts expected annual inflation to accelerate to 5.9%, and monthly consumer prices were expected to rise by 0.6%.

At the same time, the CPIH index (inflation taking into account homeowners' expenses for housing maintenance) was 5.5% after 4.9% a month earlier. In February, prices for this index increased by 0.7%.

Analysts believe that the growth of the consumer price index in Britain may even be above 10%, given the continuing rise in gasoline prices in the country due to anti-Russian sanctions imposed as a result of the events in Ukraine. Last week, amid increasing geopolitical tensions in the world, the Bank of England raised its base interest rate to 0.75% from 0.5% for the second time since February. Then the regulator warned that inflation could reach 8% in April.