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July 8. Germany faces new energy risks

The energy crisis in Europe continues to develop, reaching unprecedented proportions. First, Russia's military operation in Ukraine dealt a blow to the country's energy and economy, which led to severe disruptions in the supply of raw materials and hydrocarbons to Europe.

An additional risk for the German energy sector is the current shallowing of the Rhine River in Germany. As it’s known, the river supplies coal for thermal power plants and other needs.

The fact that now the water level in the main transport artery is extremely low suggests that barges will not be able to load thermal coal in full. And this will be a strong blow to the utilities of Germany, as they are already facing a shortage of ships.

Experts note that periodically the Rhine shallows, which restricts navigation along the river and forces to reduce the amount of cargo transported. For example, a barge with a capacity of 2500 tons has the ability to take on board only 1600 tons.

The country's energy companies are gradually starting to prepare for winter, but the prolonged drought observed in Germany in recent weeks may lead to delays in the supply of resources.

 

July 11. Brent fell to $103.70 per barrel

Oil prices were actively declining during Monday's trading, reaching a local low at $103.70 per barrel. The pressure on the asset was exerted by news about the increase in the incidence of coronavirus in China. During the day, Brent managed to recover to $106.80 per barrel.

According to official data, 352 new cases of Covid-19 were detected in China on Sunday. As a result, the authorities of several large cities have re-introduced strict restrictive measures in order to prevent the further spread of infection. And this, according to analysts, may lead to a reduction in fuel demand in the world's largest oil importer.

In addition, the focus of the markets this week is the visit of US President Joe Biden to Saudi Arabia. Biden intends to meet with the Crown Prince of the country, as well as with the leaders of other Arab countries, including Egypt, Jordan, Iraq and the United Arab Emirates.

The meeting will address the issue of increasing oil production in the region. However, even if the participants decide to increase production, this will have an extremely insignificant impact on the dynamics of the market, since the reserve capacities of the OPEC states are limited.

 

July 12. The Fed's monetary policy may drop Bitcoin to $15 thousand

Experts suggest that if the Fed continues to keep interest rates at high levels for a long time, most risky assets will be under strong pressure. As a result, the rate of the most popular cryptocurrency, bitcoin, may fall to $15 thousand.

There is an opinion among analysts that the Fed will keep interest rates at high levels for a long time due to fears of a repeat of the situation of the 1970-s, when the fight against inflation was curtailed too early and further price growth got out of control. That is why now the regulator must make sure of the victory over inflation, and only then proceed to change the strategy.

It is also worth noting that the US dollar, being a safe haven currency, still feels confident, despite the fact that the need for its purchases should have disappeared. The reason for this was serious problems in other economies, in particular the eurozone: an increasing number of analysts and market players are confident that a recession is coming – and it is expected that GDP will decline even if Russian gas supplies remain.

If we consider only the cryptocurrency market, then from time to time you can observe rebounds from local lows, but there is no talk of a full-fledged recovery rally yet. The current bitcoin quote is $20,186.

 

July 13. The Central Bank of South Korea raised the rate by 50 bp at once

For the first time in history, the Bank of Korea decided to raise the key rate by 50 basis points at once to combat high inflation. Now the rate is now 2.25% per annum. After the announcement of the regulator's decision, the exchange rate of the South Korean won rose against the US dollar by 0.6%. However, the currency still remains near the lowest in 13 years.

The rate has been increased for the sixth time since August 2021 and the pace of its rise has become the highest since the adoption of the key rates policy by the regulator in 1999. Analysts are confident that the central bank will continue to tighten policy in the coming months.

The chairman of the central bank of the country, Chanyon Ri, said that the non-standard decision on the rate was made unanimously, however, if the inflation curve follows the projected trajectory, further rate increases will be the usual 25 bps.

Inflation in South Korea in June was 6% in annual terms, which was the highest since November 1998. This year, inflation is expected to exceed the previous forecast of 4.5%. At the same time, the regulator presented a worsened forecast for GDP in 2022: it is expected that the rise will be weaker than 2.7%, which were predicted earlier.

 

July 19. Bitcoin reached a month-high

The bitcoin exchange rate has risen to a monthly maximum, and the Coinbase cryptocurrency exchange is suspending its partner program in the United States – these and other news from the world of digital currencies are in our review.

The rate of the most popular cryptocurrency rose to a maximum in a month. The current bitcoin quote is $22,844. On some exchanges, the currency even reached $22,990.

Despite the local growth, analysts believe that the «bearish» cycle observed today may last for about 4 more months. These assumptions are based on a comparison of the current market situation with previous cycles in the history of cryptocurrencies.

Cryptocurrency exchange Coinbase is temporarily closing a program to attract new users in the United States in order to reduce operating costs amid the ongoing crypto winter.

The participants of the affiliate program have received notifications that the program is being closed, and compensation for their costs and commission will no longer be paid.

One of the potential critical hubs of the UAE, against the background of the global growth of Web3 (the decentralized Internet of the future), is launching a project for the development of the metaverse, primarily aimed at artificial intelligence. The aim of the project is to transform the Emirate of Dubai into one of the 10 leading economies of the metaverse in the world.

July 18. Inflation in the eurozone in June reached a record 8.6%

According to the final data of the Statistical Office of the European Union Eurostat, consumer prices in the eurozone increased by 8.6% in annual terms in June. This indicator has become the maximum since the beginning of the data calculation. In May, the indicator was fixed at 8.1%.

The final data coincided with the preliminary ones. Analysts also did not expect a revision of the preliminary estimate.

On a monthly basis, consumer prices increased by 0.8% (as in May).

In particular, the cost of energy resources jumped in price by 42% compared to June last year. Food, alcohol and tobacco rose by 3.7%, industrial goods – by 4.3%, services – by 3.4%. Excluding food and energy, inflation rose by 3.7% y/y and 3.8% m/m last month.

In all EU countries, inflation accelerated to 9.6% y/y in June from 8.8% in May. The lowest inflation in the EU was recorded in Malta (6.1%), France (6.5%) and Finland (8.1%), the highest in Estonia (22%), Lithuania (20.5%) and Latvia (19.2%).

Experts note that inflation exceeds the target of the European Central Bank (2%) by more than four times. The next ECB meeting will be held this Thursday, and it is likely that key interest rates will be raised immediately by 50 basis points, and not by 25 bps, as previously expected.

 

July 20. Oil is moderately cheaper in the middle of the week

Oil quotes are moderately declining on Wednesday after yesterday's growth to the highest since the beginning of July.

On July 18 Brent was trading near $99.65 per barrel, then on the 20th the asset sharply strengthened to $107.60. The current quote is $105.57 per barrel.

North American WTI oil shows similar dynamics: a decline to $98.94 per barrel after rising to a maximum of $100.55. The current WTI quote is $99.10 per barrel.

Fears that the actions of the US administration to combat climate change will negatively affect oil production in the country contributed to the growth of both assets. Yesterday, US President Joe Biden promised to take decisive measures on the part of the executive branch in order to combat climate change and support renewable energy. However, the president did not specify the details, which caused a wave of concerns among market participants.

Previously, the environmental measures of the authorities included reducing the area of territories adapted for oil and gas production.

Today, yesterday's data from the American Petroleum Institute put pressure on Brent and WTI. The report showed that the growth of crude oil reserves in the United States last week amounted to 1.5 million barrels, which was higher than the projected 400 thousand barrels. Today, we should pay attention to similar statistics from the US Department of Energy – if official data confirm the growth of hydrocarbon reserves, oil quotes will continue to decline.

 

July 21. The ECB raised the rate by 50 bps at once for the first time in 11 years

During today's meeting of the European Central Bank, a historic decision was made – for the first time in 11 years, the regulator raised the base interest rate by 50 basis points at once: from 0% to 0.5%. The deposit rate was increased to zero (from minus 0.5%), the rate on short-term loans was increased to 0.75%.

Thus, the regulator intends to fight record inflation, the level of which was 8.6% in June.

A further increase in the ECB's key rate is expected in September. Here you can see the European central bank following the global trend: the Bank of England, for example, has already raised its interest rate 6 times over the past six months. And the key rate of the US Federal Reserve System may reach 3.5% by the end of the year.

At the same time, the ECB understands that a change in the course of monetary policy is associated with the risk of recession against the background of the war in Ukraine.

Additional pressure on the European economy is exerted by the government crisis in Italy: the resignation of Mario Draghi, who previously headed the ECB, led to a drop in the main index of the Milan Stock Exchange. Moreover, due to political uncertainty, the cost of servicing Italy's national debt will increase.

 

July 26. Gas prices in Europe jumped above $1,900

According to the London ICE exchange, gas prices in Europe are rising moderately on Tuesday and are holding above $1,900 per thousand cubic meters.

The cost of «blue fuel» jumped sharply yesterday after Gazprom announced plans to reduce supplies via the key Nord Stream gas pipeline from Russia to Europe. According to the plan, from June 27, the pipeline will pass no more than 33 million cubic meters per day, which is only 20% of the nominal capacity of the main line.

Analysts believe that exchange prices for gas in Europe may exceed $2,000 per thousand cubic meters for the first time in four months. The last time the cost of gas exceeded this mark was in early March – then gas quotes approached the $4,000 mark due to fears of a ban on Russian energy resources.

The estimated gas price on the European stock exchange in July averages $1,742 per thousand cubic meters. This is several times higher than in the same period last year. Experts note that there have not been such consistently high prices in the entire history of the operation of gas hubs in Europe – since 1996.

July 25. Brent fell below $98 per barrel

World oil prices continue the decline, which began at the end of last week. The current Brent quote is $97.66 per barrel.

Pressure on the commodity asset is exerted by traders' concerns about the prospects for economic growth and demand for energy resources in the world in conditions of high economic uncertainty. The fact is that the world's central banks are aimed at curbing the acceleration of inflation, which can lead to a recession.

The focus of the markets in the last trading week of July is the meeting of the US Federal Reserve System, which is likely to be another reminder of the economic difficulties in the country and in the world. The results of the meeting will be published on Wednesday, and most analysts expect another rate hike by 75 basis points, to 2.25-2.5%.

As for demand, analysts believe that oil demand may exceed expectations even in the event of a weakening of the US economy. The fact is that consumption growth in recent years has lagged behind the average level for 40 years due to coronavirus restrictions and should return to normal levels.

In general, despite the local decline, the oil market is likely to continue to grow in the coming weeks, given the beginning of the hurricane season, which may limit production in the Gulf of Mexico. And this traditionally pushes oil prices up.

 

July 27. The yuan came under pressure amid problems in the Chinese housing market

On Wednesday, the Chinese yuan showed a decline against the background of weak demand for loans, which led to a reduction in REPO rates.

Today it became known that short-term REPO rates on the continental market fell below 1% for the first time since January 2021 under the pressure of excessive liquidity and restrained demand for loans.

Analysts note that with very low real interest rates in China, it is possible that the Chinese economy falls into a liquidity trap. And to maintain its growth, additional fiscal stimulus and loosening of the regulation of the real estate market may be required. The traditional easing of monetary policy now is not expected to effectively support economic growth.

Before the market opened, the People's Bank of China set the median rate at 6.7731 yuan per US dollar against 6.7483 yuan on Tuesday.

Additional pressure on the Chinese currency is exerted by the expectation of the outcome of the US Federal Reserve meeting and the rate decision. Investors are also waiting for a telephone conversation between Chinese Leader Xi Jinping and US President Joe Biden scheduled for Thursday.

It is also worth paying attention to the statistics released today: in June, the profit growth of manufacturing companies in China resumed and amounted to 0.8% compared to June last year. In May, the indicator decreased by 6.5%.

 

August 8. The oil market remains under pressure

Yesterday, oil prices again showed a decline in the area of multi-month lows – to the level of $93.20 per barrel. Today, Brent crude managed to recover to the level of $94.25.

Pressure on the oil market continues to be exerted by investors' fears that rising interest rates and a slowdown in the global economic recovery will have a significant negative impact on demand.

The worries of market participants intensified yesterday after the Bank of England decided to raise the base interest rate to 1.75% from 1.25% per annum, at a record pace since 1995. At the same time, the British regulator noted that it expects a decline in the UK economy in the fourth quarter of 2022, and this decline will last throughout 2023.

However, a number of analysts believe that it is too early to say that the world economy is in recession. Moreover, sharp fluctuations in the oil market due to the current global economic conditions make it difficult to forecast a deficit or surplus of production for 2022.

On August 3, OPEC+ decided to increase oil production in September by 100,000 barrels per day, and this decision is aimed at studying the market reaction and may be revised.

 

August 9. Oil prices rise on news of limited supplies to Europe

The oil market continues to show an upswing that began during yesterday's trading session. The quotes were supported by the news that Ukraine suspended the pumping of oil from Russia to Hungary, the Czech Republic and Slovakia.

The price of Brent rose from $93.20 per barrel to $98.30 during the day. The current quote of the asset is $97.66 per barrel. WTI grade oil shows similar dynamics: the asset rose from the level of $87.40 to $92.60. The current quote of North American oil is $91.60 per barrel.

The news about the restriction of Russian oil supplies to Europe against the background of the ongoing energy crisis provides significant support to oil prices. Back on August 4, the Ukrainian national company Ukrtransnafta stopped pumping Russian oil through the southern branch of the Druzhba oil pipeline system, since the Russian side cannot make a payment for transit under EU sanctions.

Additional support for oil prices is provided by the depreciation of the US dollar against world currencies. The dollar index declined by 0.37% to 106.04 points.

 

August 10. Crypto market news

Bitcoin has sharply increased in price by $1.000 and exceeded the level of $24.000 after the release of inflation data in the United States. The current BTC quote is $24.077, over the past day the cryptocurrency has risen in price by 3%. The cost of bitcoin increased after the US Department of Labor reported an increase in consumer prices in the country by 8.5% year-on-year in July.

The Coinbase crypto exchange recorded a loss of $1.1 billion in the second quarter. This became known from the company's financial report. Coinbase has suffered due to a sharp decline in trading volumes caused by the collapse of cryptocurrency quotes in recent months. In particular, the price of bitcoin has dropped by almost 70% from the historical maximum set in November 2021.

The developers of the Phantom cryptocurrency service announced the results of an investigation into the hacking of 9230 Solana wallets and the theft of $4.08 million in cryptocurrency that occurred on August 3. The representatives of the project found out that all the affected addresses were related to the Slope mobile application – they were created, imported or used in it. Further investigation is ongoing.

In China, more than 12 thousand accounts in local social networks were blocked, the owners of which promoted and advertised the cryptocurrency. Also, Chinese web platforms have deleted more than 51 thousand posts with illegal advertising of earnings through investing in bitcoin.

The Robinhood cryptocurrency service, by court decision, will pay compensation totaling $9.9 million to all users affected by platform outages in 2020. Then the blocking of traders' operations led to significant losses, as at the same time the financial markets showed record growth results.

 

August 11. US stock exchanges continue to rally

The main US stock indexes opened trading on Thursday with growth, continuing to follow the dynamics of the previous day. The market was supported by data indicating a slowdown in inflation in the United States.

In particular, the Dow Jones Industrial Index (DJIA) rose by 0.79% to 3,3571.43 points, the NASDAQ index of high-tech companies – by 0.98% to 1,2981.20 points, the S&P 500 broad market index – by 0.88% to 4,247.12 points.

Yesterday, the US Department of Labor reported that annual inflation in the country slowed down more than expected by the end of July – from 9.1% to 8.5%. On a monthly basis, consumer prices did not change, while analysts expected them to grow by 0.2%.

Market participants expect that the slowdown in inflation will force the US Federal Reserve System to begin easing monetary policy. According to the survey, 63.5% of analysts expect the regulator to raise its base rate by 50 basis points, although earlier the markets predicted a third increase in a row by 75 bp.

Investors also paid attention to the data on applications for unemployment benefits. Their number has grown to 262 thousand, while analysts expected an increase to 263 thousand. The indicator of the previous week was revised from 260 thousand to 248 thousand applications.

 

August 15. The European market is growing at the beginning of the week

European stock indexes are growing moderately at the beginning of a new trading week. And investors continue to analyze weak statistics on the Chinese economy.

The German DAX index is trading near the values of the previous session (13.786,72). The CAC 40 in France rose 0.2% to 6,533.12 points, and the British FTSE 100 was trading 0.2% higher than the previous close at 7,539.65.

Economic data from China showed that the pace of economic growth in the country unexpectedly slowed in July, which forced the central bank of China to reduce the key lending rate from 3.70% to 2.75%. Industrial production in July increased by 3.8% compared to a year earlier, but the growth rate was lower than the expected 4.6%. Retail sales increased by 2.7% compared to a year earlier, while failing to meet forecasts of 5.0% growth and 3.1% growth observed in June.

In Europe, the European Central Bank raised interest rates by half a point in July and is expected to do the same in September. The tightening of the ECB's monetary policy comes despite the fact that the risk of recession in the eurozone has reached its highest level since November 2020. And all because of record inflation against the background of a shortage of energy carriers.

Corporate news of European companies

Shares of AstraZeneca PLC rose 2.6% after the drugmaker announced that its anti-cancer drug Enhertu slowed the progression of a form of breast cancer in previously treated patients.

Shares of Henkel AG & Co. Stocks rose 0.4% after the German consumer goods company reported that its sales volume increased in the first half of the year, but profits declined due to rising prices for raw materials and logistics.

 

August 16. Gold falls on expectations of the next move by the US Federal Reserve

On Tuesday, the price of gold continues to decline moderately – pressure on prices is exerted by expectations of further tightening of monetary policy by the US Federal Reserve.

During yesterday's trading, the precious metal fell from $1818 to $1789 per ounce. The current gold quote is $1791.

Analysts believe that the further dynamics of gold prices will depend on the policy of the US Federal Reserve. Investors expect further growth of the discount rate, which is negative for the precious metal quotes. Tomorrow, the minutes of the July meeting of the US Federal Reserve will be published, which should clarify the issue of how the monetary policy of the regulator will change. If the central bank's rate is raised by 75 basis points in September, gold may continue to fall.

The «hawkish» policy of the American regulator is holding back gold from rising in price, which explains the inability of the asset to gain a foothold at a price above $1800 per ounce. At the same time, some experts say that the process of reducing the rate will not begin even next year.

Additional pressure on gold quotes yesterday was exerted by data from China. According to recent statistics, the country's economic recovery is on the decline, which may lead to a decrease in physical demand for gold from the world's largest consumer.

 

August 17. Macroeconomic events of the day | August 17

New Zealand

The Central bank of New Zealand has introduced a policy to combat high inflation in the country, increasing the interest rate by 0.50 basis points – from 2.5% to 3%. This is the fourth year that the New Zealand central bank has raised interest rates.

Great Britain

Inflation in the UK reached double digits for the first time in 40 years: consumer prices rose by 10.1% in annual terms in July. Analysts note that the last time inflation in the UK was above 10% was in 1982. Compared to June, consumer prices increased by 0.7%. At the same time, economists predicted an increase in annual inflation to 9.8%.

Eurozone

According to the second estimate of the European statistical agency Eurostat, the GDP of 19 eurozone countries in the second quarter of 2022 grew by 3.9% year-on-year and by 0.6% quarter-on-quarter. Analysts expected growth of 4% in annual terms and 0.7% in quarterly terms.

The United States

According to the US Department of Commerce, the volume of retail sales at the end of July remained at the level of the previous month – 0.8%. At the same time, analysts expected sales to increase by an average of 0.1%. On a monthly basis, sales increased by 0.7% (excluding gasoline and car sales from calculations).

Oil

According to the official report of the US Department of Energy, commercial oil reserves in the country decreased by 7,056 million barrels per week after an increase of 5 million a week earlier.

 

August 18. UBS: oil prices will recover to $125 this year

UBS bank experts have presented a forecast according to which the price of Brent oil may recover to the level of $125 per barrel by the end of this year.

Analysts are confident that despite the fact that Brent has declined by 25% since mid-June due to fears of a recession, limited global oil reserves will lead to an increase in hydrocarbon prices. Two months ago, oil quotes were located near the level of $125 per barrel, today Brent is trading at $96 per barrel.

In addition to concerns about a possible recession in the United States and China, oil prices are being pressured by the risks of an increase in oil exports from Russia and OPEC member countries, as well as progress in nuclear negotiations with Iran, which could lead to more oil on the market.

However, despite all these factors, UBS still believes that the current decline in oil prices does not fully take into account the limitation of global supply, and by the end of the year the price will be able to recover to $125 per barrel.

As you know, OPEC and its allies agreed to increase production by only 100 thousand barrels per day in September, which is one of the lowest rates in the history of the organization. According to the alliance itself, the actual increase in production in September will be only one third of the agreed increase in supply volumes.

Moreover, European countries have agreed to reduce imports of crude oil and petroleum products from Russia by almost 3 million barrels per day by the end of 2022. High prices for coal and natural gas will also contribute to the increase in the cost of oil, as utility companies begin to switch from expensive fuels to cheaper ones for electricity production.

 

August 19. The dollar index rose to highs on the signals of the US Federal Reserve

On Friday, the US dollar shows strengthening to a one-month high in pairs with major competitor currencies. The dollar index is currently 0.17% higher than Thursday's closing level (107.65); the maximum value of the USDX index was reached on July 18 at 107.72.

The US currency is supported by statements by the heads of the US Federal Reserve on the need for further interest rate increases. Next week, the central bank's symposium will be held in Jackson Hole, and it is expected that representatives of the regulator will give new signals about the dynamics of monetary policy.

Earlier, the president of the Federal Reserve Bank of St. Louis, James Bullard, said that he was leaning towards a third consecutive increase in the key rate by 75 basis points at the Fed meeting in September. His colleague from San Francisco, Mary Daly, also believes that an increase of 50 or 75 points would be quite reasonable. Other representatives of the Federal Reserve are also confident that it is too early to ease monetary policy, since inflation is still at record levels.

Additional support for the dollar was provided by yesterday's data on the labor market in the United States. The number of initial applications for unemployment benefits decreased by 2 thousand from the revised figure of the previous week – to 250 thousand. Unemployment in May remained at the April level of 3.6%, and the number of people employed in non-agricultural sectors of the economy increased by 390 thousand people.

The USD/JPY pair has risen to a maximum since July 28 (136.69) and is preparing for the strongest weekly growth since June 10. EUR/USD is still sideways near the level of 1.0086, and the GBP/USD pair has fallen to a minimum since July 21, 1.1895.

 

August 22. Oil prices collapsed amid progress in Iranian talks

Oil prices are falling at the beginning of a new trading week, the current Brent quote is $93.10 per barrel. The daily low was marked at $92.97.

Investors continue to monitor the progress of negotiations between the United States and Iran on the nuclear deal. Last weekend, the next stage of the debate took place, which resulted in the achievement of some progress in the negotiations.

«We may be closer to concluding a deal than it was two weeks ago, but the result remains unpredictable, as some contradictions remain,» a White House spokesman said.

At the meeting, US President Joe Biden discussed with the leaders of France, Germany and the United Kingdom the ongoing negotiations on the nuclear deal and the prospects for the return of Iranian oil to the market in the amount of 1 million barrels per day. The parties also discussed the need to strengthen the support of partners in the Middle East region.

In addition, the market is monitoring the situation in China, where the authorities of Sichuan Province have extended restrictions on the supply of electricity to industrial enterprises to combat power outages. All this negatively affects the activity in the industrial sector of the region.

 

August 23. Business activity in the eurozone falls for the second month in a row

According to preliminary data from the research organization S&P Global, the composite purchasing managers index (PMI) of 19 eurozone countries in August continues to remain below the level of 50 points – the bar separating the growth of business activity from the fall. The indicator decreased from 49.9 points in July to 49.2 points, that is, business activity in the region is falling for the second month in a row.

Nevertheless, the indicator turned out to be higher than the expectations of market participants (49 points).

The indicator of activity in the service sector decreased to 50.2 points (from July 51.2 points), while updating the minimum since April 2021.

The manufacturing PMI fell to 49.7 (from 49.8 points), reaching the lowest value since June 2020.

Germany's composite PMI in August fell to 47.6 points (from 48.1 points), also to the lowest since June 2020. The indicator in the service sector fell to 48.2 (from 49.7 points), while in industry the indicator rose to 49.8 points from 49.3 points a month earlier.

France's composite PMI was 49.8 points compared to July's 51.7 points. The index of business activity in the service sector decreased to 51 from 53.2 points, in the manufacturing industry – to 49 from 49.5 points.

The UK composite PMI in August, although it remained above 50 points, but fell to the lowest since 2021 – 50.9 points from 52.1 points a month earlier. The indicator in the services sector has updated at least in 1.5 years (52.5 points), and in the manufacturing industry – it turned out to be at the lowest level in 27 months (46 points).