Weekly News 2022/03/28-2022/04/01

U.S stock market edged higher on Friday after a strong start to the second quarter, with the monthly U.S jobs report showing a strong labour market that could keep the Federal Reserve on track to maintain its hawkish policy stance. Nonfarm payrolls rose by 431,000 jobs in March below expectations but still show strong job growth. The unemployment rate fell to 3.6% two-year low, and average hourly earnings rose 5.6% year over year.  

Senior investment strategist Brian Jacobsen said there has been a huge increase in jobs and more people are returning to the office. If other data between now and the next Fed meeting remains so upbeat, the Fed is likely to feel comfortable raising rates by 50 basis points and announcing a significant reduction in its balance sheet. 

The S&P 500 posted its biggest quarterly drop since the U.S coronavirus outbreak in the first quarter, on worries about rising prices, while the war in Ukraine further fueled inflation and worries that the Federal Reserves response could slow economic growth. However, the S&P ended the month up 3.6% as stocks rebounded in March. 

April tends to be a strong month for the stock market, and the last time it fell monthly was in 2012. Strategist Ryan Detrick noted that the average April performance of stocks was the best of any month since 1950. 

Microsoft (NASDAQ: MSFT) cloud services are targeted by EU antitrust regulators. EU antitrust regulators are reportedly asking Microsoft's cloud service competitors, a move that could develop into a formal investigation. According to a questionnaire obtained by the media, the European Commission said “Information available indicates that Microsoft may use its potential dominance in certain software markets to prevent competition in relation to certain cloud computing services”. 

GameStop (NYSE: GME) will seek shareholder approval at its next shareholder meeting to increase the number of Class A common shares from 300 million shares to 1 billion shares, in part for a stock split in the form of dividends, according to an SEC filing. The company will also ask shareholders to vote on an incentive plan “to support future compensatory equity offerings,” the company added. 

Xpeng Motors (NYSE: XPEV) delivered 15,414 vehicles in March, a year-on-year increase of 202% and a month-on-month increase of 148%. In the first quarter, a total of 34,561 smart cars were delivered, a year-on-year increase of 159%. The monthly delivery of the P7 smart coupe exceeded 9,000 for the first time. 

NIO (NYSE: NIO) delivered 9,985 vehicles in March, a year-on-year increase of 37.6% and a month-on-month increase of 63%; in the first quarter, 25,768 vehicles were delivered, a year-on-year increase of 28.5%. As of March 31, 2022, a total of 192,838 vehicles have been delivered. 

After hitting a low in late January, bitcoin prices have surged 30 percent, including a 13 percent gain in March. The cryptocurrency market has experienced a two-week rally, with the surge likely due to increased risk appetite and positive regulatory developments. However, the situation of the Russia-Ukraine invasion and conflict can be quickly turned around. 

Crypto analyst Mads Eberhardt said that since December the crypto market has been driven largely by the same events as the stock market, especially tech and growth stocks. In our view, a general shift in sentiment towards significantly riskier assets with investors replacing some of the less risky assets has led to a broad-based decline in the cryptocurrency market over the past few months. Furthermore, with global unrest intensifying, especially from the Ukrainian invasion, cryptocurrencies do not appear to be the safe haven of those in the crypto community who refer to Bitcoin as digital gold. Conversely, cryptocurrency markets have underperformed during times of heightened global turmoil. 

According to media reports, asset management giant VanEck said that if Bitcoin becomes a global reserve asset, the price per coin could be as high as $4.8 million. Eric Fine head of emerging markets debt at VanEck said in a March 30 report that Bitcoins implied price is between $1.3 million and $4.8 million. 

Strong U.S jobs data boosted the dollar and supported bets that the Federal Reserve will raise interest rates sharply. Spot gold fell on Friday, falling by more than 1% at one point to a fresh daily low of $1,917.20 an ounce. According to the most active contract, gold fell 1.6% for the week. 

Data showed the U.S unemployment rate fell to a two-year low of 3.6 percent and wage growth accelerated again, putting the Fed on track for a sharp 50 basis point rate hike in May. The data pushed benchmark U.S 10-year Treasury yields and the dollar index higher, making gold less attractive to overseas buyers. The 10-year U.S. Treasury yield was at 2.381%, having hit a high above 2.45% on Friday. 

Market analysis manager LukmanOtunuga said Gold bulls are likely to be chased by a stronger dollar and rising U.S Treasury yields as rate hike expectations rise, which will attract bears back into the market.  

Bart Melek, commodity strategy said expectations of higher interest rates are weighing on gold prices because it will lead to higher opportunity costs of holding non-yielding gold. However, he added that with Fed policy still a long way from being neutral, gold will continue to be fairly firm. 

On Friday, U.S crude was down 0.86% late at $99.42 a barrel after members of the International Energy Agency (IEA) agreed to join the U.S in a coordinated release of oil reserves for the second time in a month to ease concerns over the conflict between Russia and Ukraine which caused market turmoil. 

U.S President Joe Biden on Thursday unveiled the largest emergency oil reserve release in U.S history, set to release 1 million barrels a day of crude over six months starting in May. 

HidechikaKoizumi, head of the international affairs department at Japan's Ministry of Economy, Trade and Industry, said the IEA was unable to agree on a total amount and a quota for each country. Details of the new emergency reserve release will be announced early next week. 

The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, the OPEC+ agreed on Thursday to stick to a plan to increase output by a modest 432,000 barrels per day, defying pressure to increase output more aggressively. OPECs increase in oil output in March fell short of targets agreed with its allies, as supply disruptions from some African members partially offset increased output by Saudi Arabia and other major producers, an agency survey showed. 

Analyst Stephen Brennock said the imminent release of U.S reserves does not change the fact that the market will struggle to find enough supply in the coming months. 

The dollar rose on Friday as strong U.S jobs data for March fueled expectations that the Federal Reserve will speed up its pace of interest rate hikes to curb rising inflation. Adding to the momentum for the greenback, chief market strategist Karl Schamotta said another strong data supported expectations that the Federal Reserve will raise rates two or more sharply in the coming months. Markets expect the Fed to raise interest rates by 0.5 percentage points at each of the next three meetings to deal a more decisive blow to inflationary pressures. Previously, the Federal Reserve raised interest rates by 25 basis points on March 16, launching a new round of the tightening cycle. 

The dollar index was up 0.23% at 98.58, however the dollar was down 0.21% for the week. Safe-haven demand for the dollar was boosted by a rebound in midweek losses after a rebound in global risk sentiment as hopes for progress in peace talks between Russia and Ukraine faded. 

The euro failed to find any support from soaring eurozone inflation. Eurozone inflation climbed to a record 7.5 percent in March, adding to pressure on the European Central Bank to rein in runaway prices even as growth slows sharply. The euro was down 0.19% at $1.1044. The euro fell sharply on Thursday after hitting a one-month high as hopes for a ceasefire between Russia and Ukraine faded. 

OnePro Special Analyst

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