Market SnapSHots

18th July 2022

Our weekly series, giving insights into what's moving the markets along with a calendar of events for the week...

Market Overview

The Labour Statistics Bureau released its US CPI report, which stated that annual inflation went up by 9.1% in June, representing the highest level since November 1981. This caused the yield curve between the US 10-Year and 2-Year treasury yield to invert to its largest point since 2000. Yield curve inversions are often seen as signals that a recession is on the horizon and US stock markets reacted in red (CNBC, Bloomberg Markets). The US stock markets partially offset the losses on Friday, as investors drew optimism from
positive retail sales and consumer confidence numbers. Citigroup and UnitedHealth posted positive earnings during their release which helped close the week on a more positive note (MarketWatch).

In Europe, political crisis in the UK and Italy will dominate headlines this week. Italian Prime Minister Mario Draghi offered to resign after a split in his national unity government- a decision that has caused Italian markets to convulse. Italy is gearing for snap elections, while several political leaders are still redoubling efforts to convince the Prime Minister to withdraw his resignation. Draghi will face lawmakers on July 20th with his final decision (The Straits Times, Bloomberg News). On the economic calendar, Euro Area inflation numbers are set to release on Tuesday with the ECB’s interest rate decision on Thursday, expectations for which will predict moves in the European market.

Commodities, FX and Bonds

Prices of oil futures fell below $100 per barrel overnight on Thursday, as rising cases of positive COVID-19 patients in China prompted concerns about national lockdowns and reduction in global demand. Saudi Arabia announced that the country plans to increase oil production to 13 million barrels per day. While US President Biden’s ME visit did not materialize any commitments, Saudi Arabia has stated that OPEC and its partners will continue to assess market conditions and take appropriate action (Bloomberg Markets). A stronger USD and anticipated rate hike have cause previous metals to enter bearish
territory. Silver’s use in electric batteries and solar panels implies a boost in industrial demand for the white metal as there is a shift towards green energy, (Pictet Perspectives). Overall, the outlook is brighter for silver than gold in the longer term.

Please find full weekly note below: