Market Analysis

European shares are up following a bullish trend from China

EUROPEAN SHARES 
European shares followed the Asian bullish trend overnight, pushing benchmarks higher alongside Treasuries, as risk aversion eased overnight. Today’s bullish pressure came from China after investors welcomed improvements registered on the virus front, with a decrease in cases, sparking hopes of reduced restrictions and impact towards growth. Meanwhile, investors focus is now slowly shifting towards inflation, with the highly awaited US CPI figures due later in the afternoon. Even if no significant change is expected, today’s inflation print is seen as crucial by many as investors are desperate to know where rising prices will go. A higher-than-expected CPI would be concerning and pave the way for more monetary tightening, putting further pressure on riskier assets. On the other hand, a lower figure could be seen as an evidence inflation has peaked, sparking hopes of a less aggressive approach from the FED which would benefit stocks and bonds. For now, most analysts anticipate a moderate decrease in price pressure in April, but with a figure still above 8%.

Pierre Veyret– Technical analyst, ActivTrades

Source: ActivTrader

 

FOREX

The US dollar hedged down in relation to other major currencies during early Wednesday trading but remains close to a 20-year high watermark reached earlier in the week. The markets believe the Federal Reserve will stick with its determined tightening of monetary policies, as inflation, and the reasons for it, such as a tight labour market, high energy costs, and ongoing supply chain issues, all remain a cause of concern. The release of US inflation data for April, later today, may lead to further dollar gains but is unlikely to trigger any substantial losses; a number surprising to the upside will increase market bets on a 0.75% rate hike and increase demand for the dollar, while a figure below expectations is unlikely to change the Fed’s plans for the months ahead.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

GOLD

Gold prices bounced back from 2-month lows during early Wednesday trading. The price of the precious metal is suffering due to its inverted correlation with the US dollar, which is currently hovering close to a 2 decade high reached earlier in the week. With US inflation data for April expected later today, there may be further downside for gold, as a number surprising to the upside, which in this case will be more than 8.1%, could increase market bets on steeper tightening by the Fed and further strengthen the dollar. On the flipside, there is limited scope for dollar losses because even if the inflation figures surprise to the downside, the Fed will still be expected to maintain its current plans for consecutive 50 basis points hikes in June in July.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

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