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October 4. The Reserve Bank of Australia raised the base rate by only 25 bps

The Reserve Bank of Australia (RBA) unexpectedly reduced the pace of tightening its monetary policy, noting a deterioration in the global economic outlook. This time, the regulator raised the interest rate by only 25 basis points, to 2.6%. Most analysts expected an increase of 50 bps.

Recall that the RBA raised the rate by 50 bps in June, July, August and September in an attempt to slow down inflation, which may peak by the end of 2022 at about 8%.

«One of the sources of uncertainty is the prospects for the global economy, which have worsened recently,» said the head of the Australian Central Bank, Philip Lowe.

In addition, the RBA fears that the tightening of financial conditions will have negative consequences for consumer budgets and spending.

Earlier, the Australian central bank has already stated that it intends to slow down the pace of rate hikes at some point, as it expects a rapid weakening of inflation in 2023 along with falling commodity prices.

The Australian dollar reacted with a decline to the news about the rate: the AUD/USD pair fell to $0.6470 during trading on Tuesday, compared with $0.6514 at the close of the previous session.

 

October 6. Oil rose above the level of $94 per barrel

Oil quotes on Thursday remain in the area of local highs reached after the announcement of the results of yesterday's meeting of OPEC+ ministers.

The organization decided to reduce quotas for oil production in November by 2 million b/s. Analysts note that this decision signals that Saudi Arabia and the alliance as a whole are striving to stabilize and support oil markets.

At the same time, it is noted that the actual decline in production will be less, since at the moment OPEC+ lags behind the maximum permitted production levels by about 3.6 million b/s. About 1.2 million b/d of the total under–production is accounted for by OPEC countries, and 2.4 million – by OPEC+ countries.

Yesterday, after the end of the ministerial meeting, Brent jumped to the level of $93.90 per barrel. Today, the asset continued to grow and reached $94.44 per barrel. The last time such price values were observed was in mid-September.

Additional support for the oil market was provided by data on fuel reserves in the United States. According to the Ministry of Energy of the country, commercial oil reserves decreased by 1.36 million barrels last week, while analysts predicted an increase of 1.8 million barrels.

Gasoline stocks decreased by 4.73 million barrels, distillate stocks – by 3.44 million barrels. Analysts expected a decrease in gasoline stocks by 1.1 million barrels and a drop in distillate stocks by 1.5 million barrels.

October 5. The New Zealand central bank raised its key rate to a seven-year high

The Reserve Bank of New Zealand (RBNZ) has raised interest rates by 50 basis points to a seven-year high of 3.5%. The regulator also announced its readiness to further raise the rate in an attempt to contain stubbornly high inflation.

The central bank's decision coincided with analysts' forecasts. The current increase was the eighth since the beginning of the monetary policy tightening cycle, which started a year ago. RBNZ accelerated the step from 25 to 50 points in April and has now brought the rate level to the cyclical highs of 2014-2015.

It also became known that the monetary policy committee discussed an increase even by 75 bps, but eventually stopped at half a point.

«It remains appropriate to continue tightening monetary policy at the same pace to maintain price stability and ensure maximum employment,» said the representative of the regulator.

 

October 10. Gold is trading below $1700 amid a strengthening dollar

At the beginning of the new trading week, the price of gold shows a steady decline: on Monday, the precious metal quotes fell below the psychological level of $ 1,700. The current price of gold is $1,673 per troy ounce.

Gold prices have been declining for the fourth consecutive session on the back of the strengthening of the US dollar, supported by strong data on the labor market. Friday's Non-Farm payrolls report showed that unemployment in September fell to 3.5% from August's level of 3.7%, although markets did not expect a change in the indicator. The number of people employed in non-agricultural sectors of the economy increased by 263 thousand, while analysts predicted an indicator of 250 thousand.

Such macro statistics reinforced expectations that the US Federal Reserve will continue to tighten monetary policy, which traditionally supports the dollar and restrains the price of gold.

The dollar index reached a more than 7-day peak (113.225), making gold more expensive for holders of other currencies.

Silver for December delivery lost 3.4% in price and fell to $19,538. Palladium prices fell to $2,216 per ounce, platinum fell to $899.

 

October 11. The yield on German government bonds has reached its highest in 11 years

The yield on 10-year German government bonds rose to 2.346% per annum, which was the highest since 2011. The reason for the growth was the statements of German Chancellor Olaf Scholz on the sidelines of the EU summit in Prague.

Scholz expressed support for the joint placement of debt obligations by the countries of the European Union in order to raise funds to help the members of the bloc in the fight against the energy crisis. The funds raised should be distributed between countries in the form of loans, not grants.

Such a position suggests that the German leadership is significantly changing its rhetoric. Previously, Germany resisted the idea of raising funds together with countries that the German authorities consider more wasteful financially.

The change of position came after Scholz was criticized for the announced plan to support the national economy by 200 billion euros due to the energy crisis. Some countries were outraged that this plan is aimed solely at supporting the German economy, without taking into account the interests of other EU countries. And this can cause an imbalance in the block.

 

October 17. The EM government bond market faces a crisis

Analysts suggest that the authorities of countries with developing economies that have been actively borrowing on debt markets during a period of low rates are now facing an increase in debt refinancing costs. Experts fear that some Emerging markets may face a debt crisis similar to the situation in Asia in the 1990-s.

In the current period, the yield of government bonds of a third of the countries included in the EM Sovereign Dollar Debt Index exceeds the yield of US Treasuries by more than 10 percentage points. And this is already a generally accepted indicator of stress in the debt market. For example, the yield of government bonds of Kenya and Egypt exceeds the yield of U.S. government bonds by more than 10 pp, Argentina and Ghana – by more than 20 pp.

Earlier this week, the Finance Minister of Nigeria announced the attempts of the authorities to agree on the extension of the maturity of a number of bonds, stressing that we are not talking about Eurobonds. Some other EM countries intend to default and restructure their debt, as the growing debt burden leads to an outflow of investments and slows down the growth of economies.

A few years ago, many developing countries began to place bonds in local currencies en masse in an attempt to protect themselves from the risks associated with an increase in the cost of debt servicing in the event of a fall in the national currency.

However, over time, they have again increased activity in foreign capital markets against the background of extremely low interest rates in the United States and the eurozone. And in 2020, the volume of placements by developing countries of government bonds in dollars and euros reached a historic high and amounted to $747 billion.

 

October 18. Oil quotes are stuck in the range of $91-93 per barrel

For several days now, the oil market has been showing increased volatility in the range of $91-93 per barrel. The current price of Brent crude oil is $92.10 (yesterday's low of $91.40). North American WTI oil is trading near the level of $85.30 per barrel (yesterday's low is $84.30).

Today, the oil market is on the rise against the background of a local weakening of the US dollar, which is getting cheaper due to increased investor appetite for risk. At the same time, concerns about a potential recession in the global economy limit the growth of oil prices.

In addition, the downward pressure on oil prices continues to be exerted by concerns about the tightening of monetary policy of many major central banks of the world, aimed at curbing inflation. At the same time, China is expected to maintain a soft monetary policy to support the economy in the face of restrictions related to the coronavirus.

The market dynamics is also affected by the decision of OPEC+ to reduce oil production. As you know, in early October, the organization agreed to reduce production quotas by 2 million barrels per day, starting in November.

 

October 19. Oil started to rise after falling the day before

On Wednesday afternoon, oil prices accelerated their growth after falling to lows for more than 2 weeks the day before. This drop was caused by the news that the US presidential administration intends to sell some of the oil from the country's strategic reserves (15 million barrels) in response to OPEC+ decision to reduce oil production by 2 million barrels per day from November.

The current price of Brent oil is $91.27 per barrel. WTI oil rose to $84.19 per barrel. The day before, Brent fell by 1.7%, and the price of WTI fell by 3.1%.

However, analysts believe that the current local gowth is a temporary phenomenon. The oil market will continue to be under pressure while the US sells off its reserves. It is expected that the American president may make a similar decision repeatedly this winter.

The release of resources is aimed at curbing the rise in fuel prices at gas stations in the United States and for oil in the world as a whole. In total, it is planned to release 180 million barrels of «black gold». At the moment, the US strategic oil reserve is at the lowest level since 1984, which is about 400 million barrels of oil.

At the same time, the potential for growth remains in the oil market amid traders' concern about the supply. The fact is that the EU embargo on energy supplies from Russia comes into force in December, and the G7 countries continue to work on the ceiling of prices for Russian oil. These factors will eventually be able to support oil prices at sufficiently high levels.

 

October 20. France, Spain and Portugal will create Green Energy Corridor

French President Emmanuel Macron said at the EU summit in Brussels that France, Spain and Portugal intend to create a «green corridor» that will replace the MidCat gas pipeline and open access to the energy market of the European Union to the countries of the Iberian Peninsula.

The three countries intend to abandon the MidCat project and start working together to create a new gas pipeline that will be able to bring the Iberian peninsula out of isolation and create a green energy corridor between Portugal and Spain. It is also planned that the new gas pipeline will run through France to the rest of Europe.

Macron stressed that the aim of the project is to unite the energy networks of the EU countries and the soonest transition to green energy.

The new «green hydrogen pipeline» will also be able to transport gas needed by the European energy market due to the ongoing energy crisis.

The next meeting of the heads of state will take place on December 8 and 9 in Alicante at the Euromed summit, which will unite 9 Mediterranean EU states. There, France, Spain and Portugal will discuss the timing, investments, cost allocation and the amount of economic resources that will have to be used when creating a new project.

 

October 24. The yuan fell to the minimum of the global financial crisis of 2008

On Friday, the Chinese yuan paired with the US dollar collapsed to its lowest level since the global financial crisis of 2008 – the level of 7.2515, despite attempts by state-owned banks to stabilize the market. As you know, the country's state banks sold the dollar on the continental foreign exchange market to prevent a further fall in the yuan.

At the end of the week, the USD/CNY pair strengthened by 0.78%, as the growing dollar continues to push down the currencies of developing countries. In total, the currency pair has grown by 12.3% since the beginning of the year.

Analysts note that the decline of the yuan may continue against the background of the general strengthening of the US currency. Pressure on the yuan is also exerted by a significant difference between the monetary policies of the central banks of both countries: the United States shows no signs of abandoning tough rhetoric regarding rates, while the Chinese authorities are trying to support their economy with the help of soft monetary policy.

It is also worth noting that in an attempt to maintain the stability of its currency during the Communist Party Congress, the Chinese authorities continue to set a higher than expected average yuan exchange rate. Since the opening of the market, the People's Bank of China has set the average dollar-yuan exchange rate at 7.1186 against 7.1188 on Thursday.

Analysts clarify that the high fixing, relative to which the yuan can deviate by no more than 2% up or down, limits the potential for a decline in the Chinese currency. At the average rate on Friday, the range of fluctuations of the USD/CNY pair is 6.9762–7.2610, and today it has already come close to the upper limit of this range.

 

Crypto market scores gains. Experts foresee bullish rally

Early on Wednesday, digital gold edged higher. At the moment of writing, BTC is seen hovering at $20,627.

Early on Wednesday, digital gold edged higher. At the moment of writing, BTC is seen hovering at $20,627.

According to CoinMarketCap, a website tracking the price of digital assets, bitcoin hovered between $20,348 and $19,261 yesterday. Overall, the coin added 5% on Tuesday.

This month, the flagship cryptocurrency used to consolidate in the $18,500–$20,300 range. However, in recent days experts noticed the potential formation of double support in the crypto market. Should bitcoin break through the mark of $20,300 and extend growth, along with noticeable trading volumes, this would be a clear bullish signal for BTC, analysts suggest.

Altcoin market

Ethereum, bitcoin's main rival, went up earlier today as well. At the moment of writing, ETH is seen trading at $1,485.

As for the top 10 cryptocurrencies by market capitalization, all coins, except for XPR, traded in the green zone yesterday, with ether leading the way (+10.66%).

Last week, ETH was also the best performer among the 10 cryptocurrencies by market capitalization, gaining 13.65%. Meanwhile, XRP, which lost 0.42%, was the list's worst performer.

This week, all the top 10 cryptocurrencies by market capitalization are scoring gains. At the same time, the former bearish resistance turned into important support for them. In light of those facts, many analysts forecast a bullish rally for popular coins in the crypto market in the next four months.

According to the world's largest virtual asset data aggregator, CoinGecko, over the past 24 hours, Aptos showed the worst performance, losing 4.98%, while the Toncoin coin showed the best results, gaining 23.10%, among the top 100 digital assets by market capitalization.

Last week, Axie Infinity (-16.19%) was the worst performer among the top 100 strongest digital assets, while Toncoin (+43.98%) showed the best performance.

Based on the CoinGecko data, the total crypto market capitalization exceeded $1 trillion on Wednesday morning. Yesterday, it grew by about 5%.

Since last November, when the daily crypto market capitalization was above $3 trillion a day ($3.08 trillion), it has more than tripled.

At the same time, the total trading volume of virtual coins over the past 24 hours reached $77.3 billion, with BTC (38.1%) and ETH (17.6%) seen as the main contributors.

 

De-dollarization or de-eurozation? Analysts consider both scenarios possible

Analysts have been discussing the possible ditch of the US dollar in foreign settlements for a long time. However, now, they do not exclude a similar scenario for the euro. Analysts are mulling over what could lead to such outcomes. They fear that in the near future the European currency will face the same challenges as the Us dollar. Currently, many countries are trying to replace the US dollar in mutual settlements.

Analysts pinpoint that the euro has more disadvantages than advantages. Settlements in the euro and its support are getting more expensive. According to the Eurobarometer, the euro is popular with 60% of the population. However, now many EU citizens are skeptical about the future of the euro. Some economists reckon that some EU states may leave the eurozone and ditch the euro.

Earlier, economists suggested a possible replacement of the US currency by many countries. However, the euro is now facing such a risk as well. De-eurozation looks quite feasible. However, the situation in the global financial market is unlikely to change in the near future, economists believe.

Currently, the authorities of many countries are trying to diversify their foreign exchange reserves to reduce dependence on the greenback. However, a sharp decline in the dollar share of international reserves looks unlikely as roughly 40% of the world's transactions are done in dollars.

The use of national currencies in international settlements spurs their demand and reduces dependence on the Fed's monetary policy. At the same time, the current geopolitical turmoil is fueling a rally of the US dollar as many countries prefer to keep the US currency in their reserves.

At the start of the week, the euro was trading almost at the same levels. On October 31, the EUR/USD pair was fluctuating near 0.9952, slightly below the previous pivot level of 0.9963.

Investors are now awaiting the release of the euro area's important macroeconomic report, namely GDP for the third quarter of 2022. According to preliminary estimates, from July to September, the economy declined slightly to 2.1%. In the second quarter of 2022, this figure totaled 4.1%.

The greenback has been rising for some time thanks to the Fed's hawkish stance. On November 2, the Bank of England and the Fed will hold their meetings. The Fed is widely expected to raise the key rate by 75 basis points to the range of 3.75-4%.

The Fed's key rate decision may significantly impact market sentiment. Some analysts believe that the regulator could switch to less aggressive tightening despite a 75 basis point rate hike. However, other analysts are certain that the regulator will hike the rate by 75 basis points at the next meeting scheduled for December 14.

At the February meeting in 2023, the watchdog is expected to increase the key rate by 25 basis points to 4.50-4.75%. Analysts suppose that three will be more 25 basis point rate increases next year. Such a scenario is bearish for the US dollar. The euro is also unable to regain long-term rise. Thus, it is recommended to buy the EUR/USD pair with a long-term target level above 1.0500.

Many economists are afraid that sentiment will become more bearish on the US currency. Last week, large traders initiated a sell-off of the greenback. As a result, the number of short positions during the week increased by 21%. If there are no positive fundamental favors, the greenback may drop lower.

Nevertheless, the US dollar remains the most popular currency, with close to 90% of all currency trades having the dollar as one leg of the transaction. It has been rallying for some time amid the Fed's aggressive tightening. In the last few months, the US dollar has reached multi-year highs against the euro, the pound sterling, the yen, and the yuan. It also took advantage of a recession in the eurozone as investors got rid of the euro in favor of the US dollar.

 

November FOMC meeting: what to expect and how to act

Today, what many are expecting will not happen: it is unlikely that the Federal Reserve will announce a change in the future course of its policy, so it is possible that we may repeat the summer scenario, when everyone was about to expect one thing from the FOMC, but everything turned out completely otherwise. Let's figure out what to expect and how best to act today.

Most likely, the US central bank will hold a fourth super-scale interest rate hike, and Fed Chairman Jerome Powell will repeat his pledges to fight inflation. But whether it will open the door for a possible rate cut in the future is a big question. The Federal Open Market Committee is expected to raise rates by 75 basis points on Wednesday, to a range of 3.75% to 4%, the highest level since 2008. By doing so, the central bank will continue its most aggressive tightening campaign since the 1980s.

During his press conference, Powell may emphasize that the Fed remains steadfast in the idea of fighting inflation, leaving open options for further aggressive rate hikes at a meeting in mid-December this year. However, the markets are already divided into two camps: some expect another rate hike of 0.75%, while others believe that the Fed will slow down and raise them by only 50 basis points.

As I noted above, Powell's July speech was misinterpreted by investors as a short-term policy reversal, in response to which the markets rallied, which softened financial conditions and reflected on bond yields. This made it more difficult for the Fed to contain prices, which forced Powell to return to a tough tone of statements again. With the latest CPI data coming out, the Fed needs to continue to maintain tight financial conditions to keep the economy cool, only to help stop price increases in the near future.

Another important point is that the expected move from the Fed today will take place less than a week before the midterm elections in the United States, where the main accusations from Republicans are based precisely on high inflation, which was allowed by the Democratic Party and US President Joe Biden. Last week, two Democratic senators urged Powell not to cause unnecessary pain to the economy by raising rates too high.

As for the statements made today after the meeting, the dollar's succeeding direction will depend on them. If promises of a "further increase" in interest rates persist, the US dollar will strengthen its position against the euro and the British pound, as well as other risky assets. If the promises are "slightly changed", for example, in order to show that the Fed is getting closer to the economy, then this may have a positive impact on stock markets and risky assets, which will pull up the euro and the British pound.

Most likely, the Fed will recall its plans to reduce its huge balance sheet. Economists predict that the balance will reach $8.5 trillion by the end of the year before dropping to $6.7 trillion in December 2024.

As for the technical picture of EURUSD, the bears actively counterattacked, which led to a new wave of decline. For growth, it is necessary to return the pair above 0.9900 and 0.9950, which will spur the trading instrument to growth towards 1.0000 and 1.0040. However, the upward prospects will depend entirely on the further reaction of buyers of risky assets to the Fed meeting. The breakthrough of parity has taken place, which, for now, allows us to keep the market at the mercy of the bears. An exit below 0.9850 will increase the pressure on the trading instrument and push the euro to a low of 0.9820, which will only aggravate the position of buyers of risky assets in the market. Having missed 0.9820, it will be possible to wait for new lows around 0.9780 and 0.9750.

As for the technical picture of the GBPUSD, although the pound is being corrected, it has already reached quite important levels. Now the bulls are focused on defending the support at 1.1500 and breaking through the resistance at 1.1550, limiting the pair's growth potential. Only a break of 1.1550 will return prospects for recovery to the area of 1.1610 and 1.1690, after which it will be possible to speak of a sharper upward spurt of the pound, to the area of 1.1730 and 1.1780. We can talk about the trading instrument being under pressure after the bears take control of 1.1500. This will deal a blow to the bulls' positions and completely cancel out the short-term prospects of the bull market. A break of 1.1500 will push the GBPUSD back towards 1.1440 and 1.1345.

 

Bullish sentiment in gold is growing

Gold's bounce off a two-year low, followed by a nearly 3% gain on Friday, is creating solid bullish momentum among Wall Street analysts; however, some also point out that the precious metal still has some work to do to reverse the months-long downward trend.

The latest survey shows that market sentiment continues to improve and most market analysts expect prices to rise in the near future. Retail investors are also looking positively.

Bullish sentiment has been on the rise all week after gold prices ended October with their seventh straight monthly drop, the longest losing streak in 50 years.

Rising bond yields and the US dollar, which is at its highest level in 20 years, remain critical headwinds for gold; however, some analysts note that growing fears of a recession are driving demand for gold as a safe-haven asset.

[removed, pay to advertise] Hansen, head of commodity strategy at Saxo Bank, said the US recession would force the Federal Reserve to end its tightening cycle before it reaches its 2% inflation target. He added that a stagflationary environment of low economic growth and high inflation would be bullish for gold.

However, in anticipation that gold prices will have enough momentum to rise, a return to $1,680 will simply return the market to neutral territory.

Christopher Vecchio, senior market analyst at DailyFX.com, said he is neutral on gold as he would also like to see an initial push above $1,680 leading to $1,730.

Last week, 20 market professionals took part in the Wall Street survey. Ten analysts, or 50%, said they are optimistic this week. Two analysts, or 10%, said they were bearish. Eight analysts, or 40%, said they were neutral about the precious metal.

As for retail, 520 respondents took part in online surveys. A total of 240 voters, or 46%, called for an increase in the price of gold. Another 169, or 33%, predicted a fall in prices. While the remaining 111 voters, or 21%, were in favor of a side market.

Friday's rally helped gold prices end the week positively.

Problems in the labor market adds to the recession fears. On Friday, the Bureau of Labor Statistics said 261,000 jobs were created in October, exceeding all expectations. However, some analysts believe that if you delve into the essence, you can see a growing weakness.

Along with rising bullish fundamentals for gold, many analysts note that the technical outlook has turned positive as well.

"Gold had been building a technical base above $1,620 support and appears to be starting to launch up off of there," said Colin Cheshinsky, chief market strategist at SIA Wealth Management.

He added that bond yields remain well above 4%, which would be a deterrent for gold. And the Fed continues to raise interest rates, and in these conditions, gold's rally may turn towards sales.

 

November 10. Amazon's market value has fallen below $1 trillion

Amazon became the first public company to lose $1 trillion in market value. On Wednesday, the company's shares fell 4.3% to $86.14, bringing its market value now to $879 billion. For comparison, back in July 2021, it was almost $1.9 trillion.

Analysts note that such a decline is almost equivalent to the loss of the market value of Google's parent company Alphabet, which now stands at about $1.13 trillion.

In 2022, Amazon shares lost about 48% of their value. The company's market value fell below the $1 trillion mark on November 1, a few days after the publication of the third quarter report and the forecast of the slowest growth in the fourth quarter in history.

Experts note that not only Amazon has suffered losses: due to rising inflation and other macroeconomic shocks, 5 other leading American technology companies have lost almost $4 trillion of their market value this year. The reason for this, analysts call the impoverishment of people's budgets, still high inflation and rising energy costs.

 

November 14. The oil market is growing at the beginning of a new trading week

Oil prices have been showing growth for the third consecutive session amid expectations of demand growth in China as a result of changes in the policy of the country's authorities to combat coronavirus, as well as the introduction of new measures to support the economy.

As it became known, Beijing announced the reduction of mass testing of people for Covid-19, as well as the dissolution of «quarantine camps». The Chinese authorities have announced that they are planning further changes, thanks to which covid restrictions will become more focused, but not soft. Thus, China's adjustment of the «zero tolerance» for coronavirus has given a powerful incentive for the growth of the oil market.

The current price of Brent oil is $96.70 per barrel. North American WTI oil is trading near the level of $89.60 per barrel.

Analysts note that the increase in oil consumption by China may coincide with a reduction in supply on the market (due to the upcoming entry into force of the European embargo on the import of Russian oil and a reduction in OPEC+ production).

Earlier, US Treasury Secretary Janet Yellen said that the entry into force of the European embargo on the purchase of oil in Russia on December 5 is likely to force Moscow to sell some oil at a price not exceeding the ceiling set by the US and its allies if Russia wants to avoid a significant reduction in oil exports.

 

November 16. Inflation in the UK accelerated to the highest since 1981

According to the British Office for National Statistics, inflation in Great Britain accelerated to 11.1% in annual terms in October, which was the highest since 1981.

The rate of acceleration of inflation turned out to be higher than the expectations of experts, who predicted a price increase of 10.7%. In August, inflation was 9.9%, and in September – 10.1%.

Analysts call the increase in electricity tariffs the main driver of price growth. In addition, the rise in food prices had a strong impact on the dynamics of inflation. In particular, products in October rose in price by 16.4%, which was the highest in 45 years. The prices of milk, cheese and eggs have soared the most.

Thus, if we consider the poorest British families with a low level of expenses, who spend most of their earnings on paying bills and buying groceries, then for them the increase in inflation was more than 16% in October. The ONS also estimated that middle-income Britons spend about a third of the family budget for these purposes.

In the autumn, the British economy entered a recession, and the head of the Ministry of Finance of the kingdom said that Russia was responsible for this. According to him, it was Moscow that created a situation in the world that led to inflation and an increase in interest rates.

 

November 17. Wall Street: 3 oil companies whose stocks are worth paying attention to

Experts say that the tense situation on the world oil market does not bode well for many countries of the world that are still heavily dependent on fossil fuels.

However, despite this, Wall Street recommends that investors pay attention to the shares of 3 oil companies, which can bring substantial profits next year.

Shell is a multinational energy giant operating in more than 70 countries and producing about 3.2 million barrels of oil per day.

Shell has a stake in 10 refineries, and last year the company sold 64.2 million tons of LNG. The company's shares are listed on the London Stock Exchange, the Euronext exchange in Amsterdam and the New York Stock Exchange. It is worth noting that the shares registered on the NYSE have increased by 26% since the beginning of the year. Shell is trading at about $56 per share today.

Chevron is another major oil company benefiting from the commodity boom.

For the third quarter, Chevron made a profit of $11.2 billion, which is 84% more than in the same period last year, and the company's sales and other operating income for the quarter amounted to $64 billion, which exceeded last year's figures by 49%. Chevron approved a 6% increase in quarterly dividends to $1.42 per share, meaning its dividend yield was 3.0%. Over the year, the company's shares have grown by 57%.

Exxon Mobil has the largest market capitalization — more than $460 billion, which is more than Shell and Chevron.

In addition, the oil company boasts the strongest share price dynamics among all 3 companies in 2022: its shares have increased by 79% since the beginning of the year. In the first 9 months of 2022, Exxon earned $43.0 billion in profit, which is significantly more than $14.2 billion last year. Exxon Mobil's free cash flow for the first 9 months of 2022 was $49.8 billion compared to $22.9 billion for the same period last year. The company pays a quarterly dividend of 91 cents per share, which corresponds to an annual yield of 3.2%.

 

November 18. Inflation in Japan has reached its highest since January 1991

According to the Ministry of Internal Affairs and Communications of Japan, consumer prices in October increased by 3.7% compared to the same month last year. This was the highest value since January 1991, while the rise in prices was marked for the 14th month in a row.

In September, the inflation rate was fixed at 3%. Analysts had expected a 3.5% price increase.

On a monthly basis, consumer prices rose by 0.6% (the fastest pace since April 2014). In September, the indicator increased by 0.3%.

Consumer prices excluding fresh food (a key indicator tracked by the Bank of Japan) in October increased by 3.6% year-on-year after rising by 3% in September. This growth was the highest since February 1982.

In particular, food prices in Japan rose by 6.2%, fuel, electricity and water supply - by 14.6%, electricity – by 10.9%. The cost of transport and telecommunication services increased by 2%.

It is worth noting that the central bank's target is at the level of 2%, and the current inflation rate exceeds it for the seventh month in a row.

 

November 29. Oil prices rise in anticipation of OPEC+ meeting

World oil prices started to rise on Tuesday, reaching $86.68 per barrel. Investors are waiting for the weakening of quarantine measures in China and are assessing the prospects for the OPEC+ meeting scheduled for Sunday.

The current quotation of Brent crude oil is $86.00 per barrel, North American WTI oil is trading at $79.35 per barrel.

Yesterday, the quotes showed a noticeable decline: the Brent price fell below the level of $81 per barrel for the first time since January 11, 2022.

As you know, a record increase in Covid-19 infections was recorded in China for several days in a row, as a result of which some quarantine restrictions were tightened, and riots and protest actions took place in a number of cities. Now the markets expect that the Chinese authorities may move to ease restrictive measures. And since China is one of the largest consumers and importers of oil, expectations about the country's economy affect the prospects for demand for this type of raw material.

In addition, market participants are waiting for the OPEC+ meeting scheduled for Sunday. Traders evaluate what measures the alliance can take against the background of supply and demand risks. Also, the market dynamics are influenced by the results of meetings of EU countries, at which European diplomats are trying to agree on the introduction of a specific price limit for Russian oil. At the moment, the countries have again failed to come to an agreement.

 

December 6. Analysts: US bear market is two-thirds of the way

According to analysts, the US stock market has already experienced most of the current bear market, but not all of it. Therefore, the current fall in stocks will last for some time before a new rally begins.

Many have regarded the recent surge in the market as a potential start of a new bull market, but history shows that this rally may be a retreat. Traditionally, the average bear market since the Second World War lasted 14 months and led to a decline of 35.7% from previous highs. The current bear market has been going on for about 11 months and has fallen by 15%, which suggests that it has gone two-thirds of the way.

At the same time, the S&P 500 index rose by 16% from its low in mid-October of 3491.58 points – on expectations that the US Federal Reserve will begin to reduce the pace of rate hikes, and inflation will slow down.

And now the market has moved away from the October lows and returned to levels that require significant premiums to fair value. And even with the downturn this year, stock valuations still do not reflect the growing difficulties in the economy and still have not declined to the level seen during past recessions.

The federal funds rate has risen from 0.0% to a range of 3.75% to 4%, and a sixth increase is expected to take place before the end of 2022. But at the same time, the Fed will slow down the rate of increase to 50 basis points.