As investors keep a close watch on the turmoil in China after the outbreak of demonstrations over stringent Covid restrictions and lockdowns over the weekend, European and US markets are on track for a negative opening on Monday.
The disturbance occurred when infections increased, which prompted additional local Covid regulations. The Chinese economy has been hampered by the limitations for over three years, and consumers and entrepreneurs have had enough covid restrictions. The youth unemployment rate is getting close to 20%, and China remains the only country with rigid covid related policies.
China announced on Monday a daily record number of new local coronavirus infections for the fifth consecutive day. Guangzhou and Chongqing, both megacities, are fighting a losing battle to suppress outbreaks, while on Sunday, hundreds of cases were documented in numerous cities around the nation.
Crude and brent oil prices continue to struggle on the first trading day of the week as investors are apprehensive about the covid related issues emerging in China. Demand is creating the main issue for the price, and because we have a potential recession threat and now the covid issues in China, things are becoming difficult for oil traders.
The reality is that no one wants to see more lockdowns in China, as a situation like this creates nothing but more headwinds for oil prices.
Nonetheless, OPEC’s meeting remains the main anchor for oil prices this week. There is no doubt that oil prices are likely to remain highly volatile as prices are likely to react to rumours. So far, what is priced in the market is that OPEC and its allies aren’t going to increase production. Now, anything which deviates could make the price swing significantly -depending on the intensity of the outcome or rumour.
The precious metal’s price is also trading for the third day. Strangely, we have not seen a rise in the demand for the precious metal, especially in the wake of the risk-off event that is taking place in China due to covid restrictions. Generally speaking, riskier assets lose demand when an event like this takes place. However, today’s price action is not confirming this, as the yellow metal continues to trade lower and is under the bearish price influence.
One major reason we are not expressing more upside swings in the gold price is the strength in the dollar index. Some traders believe we will likely see more robust economic data this week, such as the US ADP and US NFP. A strong number may encourage the Fed to lift the interest rates more aggressively, helping the dollar index today. However, it is important to remember that the Fed has made abundantly clear that they will likely slow down the process and magnitude of interest rate hikes.
Bitcoin had a tough week as rumours continue to float that more major ruptures are in the pipeline following the downfall of FTX. However, traders are finding comfort in the news that People like CZ are dedicating more money to the ecosystem by increasing the size of the SAFU fund by another billion. There are also reports Binance.US will place a bid for voyager, a platform involved in the crypto yield business, on the back of its BTC inventory.