Stock Market Today
US and European futures are trying to recover their losses from yesterday. The Dow Jones Industrial Average fell 450 points, or 1.3 percent, on Wednesday. The S&P 500 index fell 1.2 percent. The Nasdaq Composite lost 1.3 percent of its value.
Investors are keeping a close watch on NATO’s emergency meeting. President Joe Biden is traveling to Europe to increase pressure on Russia and provide support for a ceasefire while investors are awaiting further information on the Russia-Ukraine crisis.
In terms of economic data, the US Weekly Jobless Claims and Durable Goods Orders data will be monitored by traders closely. The forecast for the US Weekly Jobless Claims is 210K and for the US Durable Goods order is -0.5%.
What Did the UK’s Chancellor Do?
In his mini-budget speech on Wednesday, Chancellor of the Exchequer Rishi Sunak provided people a bit more aid than we expected. However, we still expect real disposable incomes to fall to their lowest level on record this year. In light of lower growth, we believe the Bank of England will be more cautious about raising interest rates in the second half of the year.
Changes to UK’s GDP and Inflation forecast
In its most recent prediction, the Office for Budget Responsibility had to make a fundamental judgement about the impact of Russia’s assault on Ukraine. The outcome was a significant slowdown in growth and a significant increase in inflation. The budget watchdog now projects that the GDP would grow by 3.8 percent in 2022, down from 6% in October.
In terms of inflation, the OBR now expects price increases to peak at 8.7% in 4Q and average 7.4% in 2022, up from 4% in October. The upgrade was mostly driven by higher-than-expected energy prices, which were exacerbated by Russia’s invasion of Ukraine.
Stocks in Asia followed the slide in global stocks after three days of gains, as oil resumed its rise in markets roiled by inflation fears and the impact of the Ukraine conflict. The rebound in Treasuries was short-lived. As shares in Japan sank, the MSCI Inc. indicator of Asia-Pacific equities dipped for the first time in three days. Tencent Holdings Ltd. announced its worst quarterly growth on record and warned against potential unrestrained expansion at Chinese digital behemoths, sending tech stocks tumbling in Hong Kong.
Gold prices continue to react to two main factors and that is geopolitical tensions and the on-going soaring inflation driven by higher energy prices. Basically, higher yields affect gold, increasing the potential cost of owning non-yielding metal.
The dollar index rose on Wednesday, making gold less appealing to holders of other currencies, while oil prices rose again amid reports that US President Joe Biden and other European leaders are planning more sanctions on Russia.
Russian President Vladimir Putin’s threat to convert some gas purchases to Rubles sent European futures surging, raising fears that the move would deepen the energy crisis and clog agreements worth hundreds of millions of euros every day.
On Wednesday, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, climbed 0.4 percent to 1,087.66 tonnes, the highest level since February 26, 2021.
Brent futures have risen more than $14 a barrel, or 13%, since Monday, while WTI has risen more than $10 a barrel, or 10%, as concerns about supply disruptions grew following Russia’s invasion of Ukraine. Following news that petroleum shipments from Kazakhstan’s Caspian Pipeline Consortium (CPC) terminal had been totally suspended due to storm damage, oil prices soared more than 5% on Wednesday. Oil supplies might be cut off for two months, according to Russia’s deputy prime minister.
Traders are also keeping a close on the US and Iran nuclear negotiations. White House national security adviser Jake Sullivan said the US and its partners had made progress in Iran nuclear talks, but there are still challenges. The easing of Iranian export restrictions would assist to ease the current extreme tightness in petroleum markets. Iran is apparently planning for an increase in exports, with the state refiner NIOC reaching out to previous main consumers in India and South Korea.
Today, US Vice President Joe Biden will meet with NATO allies and is anticipated to announce more penalties against Russia for its actions in Ukraine, which Moscow refers to as a “special operation.”