Weekly market recap

Your weekly global financial market newsletter

  • The long-awaited event on the cryptocurrency market in the form of Bitcoin halving took place last weekend, but it has not yet moved the price significantly. Considering that the event was widely expected, and the price has seen quite a volatile development in recent weeks and months, it is not surprising.
  • But the long-term effect on the price may be much more significant. The media coverage of the halving itself, along with the introduction of bitcoin ETFs and the significant rise in price to new all-time highs (before the subsequent fall of almost 20% in the past week), is a guarantee that interest in and investment in bitcoin will continue to grow, according to optimists.
  • Should the scenario of the last halving be repeated, the value of Bitcoin should start to rise further after the correction and reach its new all-time highs again. The $100.000 per bitcoin threshold is thus almost certain, according to optimists. But historical returns are no guarantee of future returns. And since Bitcoin already hit new all-time highs this year before halving, the situation may be radically different.

Indices

Better-than-expected macro data in the US and hawkish statements from Fed policymakers are leading investors to believe that the central bank will not rush to cut interest rates. The bad mood on the markets is also supported by the geopolitical situation in the Middle East. Stocks are down for the third week in a row and the S&P 500 index even posted its worst weekly result in more than a year, falling below 5 000 points for the first time since the end of February. The tech-heavy Nasdaq has written off over 5% due to poor results from major tech leaders. On the other hand, good results from companies such as American Express and Procter & Gamble helped the DJIA index to perform diametrically opposed to the rest of the market.

A similar situation prevailed in European equities, which also ended with mixed results. The pan-European STOXX Europe 600 Index ended 1.18% lower, Germany’s DAX fell 1.08%, France’s CAC 40 Index was little changed (+0.14%) and the UK’s FTSE 100 Index declined 1.25%.

US30
+0.01%
US100
-5.36%
US500
-3.05%
GER30
-1.08%

Commodities

Gold continued to rise for the fifth straight week and is around $2.400 per troy ounce. The price of the yellow metal is supported by strong continued central bank purchases and ongoing geopolitical tensions. Downward pressure was from strong economic data out of the US, as well as hawkish comments from several Federal Reserve officials. The prospect of interest rates remaining restrictive for longer weighed on bullion, as higher rates diminish the appeal of non-yielding assets like gold.

The price of US natural gas rose due to an increase in crude supplies to LNG export plants. US natural gas production has declined by around 10% this year as companies such as EQT and Chesapeake Energy have delayed well completions and cut back on drilling. Meanwhile, the latest EIA report showed that U.S. energy companies pumped 50 billion cubic feet (bcf) of gas into storage last week, bringing gas inventories to 36.4% above the seasonal average.

Gold
+2.08%
Silver
+2.95%
BRENT
-3.49%
NATGAS
+4.03%

Forex

The US Dollar Index (DXY) has strengthened again and is on track for its high from last November at 107.10. Economic data released this week including retail sales, initial claims and the Philadelphia Fed Manufacturing Index continue to point to a resilient US economy and persistent price pressures. Also, the Fed is in no rush to cut interest rates, and most traders now expect the first reduction in borrowing costs in September only. The outlook for the USD remains positive, as geopolitical tensions and hawkish bets on the Fed may drive demand back to the USD.

AUD and NZD again recorded the biggest losses and new five-month lows. The declines are due to the wave of risk-off trades that took over the financial markets and also the hawkish mood from the US Fed and in turn the possibility that, especially in Australia, central banks will start cutting rates much sooner than they will in the US.

EUR/USD
+0.15%
USD/JPY
+0.94%
GBP/USD
-0.65%
USD/CAD
-0.17%

Macro

Last week, geopolitics played a significant role in the events, not only on the financial markets. The weekend drone and missile attack by Iran on Israel and then Friday’s response by Israel, leading to a straining of relations and a strong disruption of the very fragile situation in the Middle East, are and will be bad news for the world and, by extension, for the financial markets. Investors have begun to resort to so-called safe assets and, therefore, to liquidate risky positions.

The level of uncertainty is high, and a major conflict between Israel and Iran could, among other things, result in higher oil prices, which is worrying the rest of the world through inflationary developments, or rather the monetary authorities, who are still struggling to reduce inflationary pressures.

The better-than-expected data is again leading to increased concerns about whether the Fed will even move to cut interest rates later this year. Already on Monday, retail sales hinted at this scenario, rising 0.7%, well above consensus expectations of around 0.3%, while February’s gain was revised up to 0.9%.

Worse housing market data, on the other hand, deepened inflation concerns by suggesting continued tight supply. Housing starts and housing permits declined in March from February, with the former falling to its lowest level in seven months. Existing home sales also fell, though largely in line with expectations.

UK consumer prices rose by 3.2% year-on-year in March, down from 3.4% in February but above analysts’ expectations. Services inflation, which is closely watched by the BoE, remained high but slowed from 6.1% to 6.0%. Wage growth in the three months to February also slowed less than expected. The unemployment rate rose sharply from 3.9% to 4.2% in February. Job vacancies continued to fall in the first quarter.

What to watch out for this week

  • Next week will still be about geopolitics and the possible escalation of the situation in the Middle East. Any non-diplomatic solution would not only be a negative signal for the market. In addition to geopolitics, earnings from the big tech names like Alphabet, Microsoft, and Meta will continue. The rally in U.S. stocks appears to be running out of steam, partially due to worries that interest rates are likely to remain higher for longer.
  • In the US, investors will be looking for Friday's personal consumption expenditures (PCE) price index, the Fed's favourite inflation gauge, which economists expect to remain elevated in March. The Fed is no longer able to tame inflation as it has in previous months, and coupled with strong labour market data, geopolitical tensions in the Middle East that have driven oil prices higher, and comments from Fed officials are leading investors to lower expectations for the timing of a potential rate cut.
  • In addition, a preliminary estimate of GDP for the first quarter will be published on Thursday, which is expected to slow slightly compared to the previous quarter. The economy is expected to grow 2.1% in Q1, a slowdown from the 3.4% rate in Q4. Investors will also be curious about the flash S&P Global PMI survey data. The March PMI showed services industry growth slowed further last month, along with services inflation. Additionally, attention will be on durable goods orders, new and pending home sales, as well as the final reading of the Michigan consumer sentiment.
  • Meanwhile, investors will be closely watching PMI data out of the Eurozone and the UK on Tuesday for any signs that inflation, especially in the services sector, is returning. PMIs in Europe could indicate that the eurozone economy is recovering after March PMI data showed a stabilisation in activity and a softening in services inflation, keeping the European Central Bank on track for a widely expected June rate cut.
  • The Bank of Japan is expected to hold its interest rate unchanged following the latest hike, but markets will pay close attention to hints over the extent of future tightening. BOJ Governor Kazuo Ueda said that the central bank is "very likely" to raise interest rates if core inflation continues to rise, and will begin to taper its large-scale bond purchases sometime in the future. This have strengthened expectations that the central bank will raise its target for short-term interest rates from the current range of 0-0.1% sometime this year.

Disclaimer

All information provided on this site is intended solely for the study purposes related to trading on financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of FTMO and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity, and it is advised not to risk more than one can afford to lose!