By John Meyer, financial consultant. Eurasia Business News, May 2, 2022
The month of May began on a very volatile note on Wall Street, where the indices oscillated between red and green before ending in a slight rebound thanks to “cheap” purchases on the big “technos” stocks. Investors are preparing for the Fed’s announcements, which are expected to raise its main interest rate by half a point on Wednesday, during their rate-setting meeting.
Markets are anticipating a series of monetary hikes this year that will push overnight rates to 3% by 2023 to tame inflation.
In bond markets, the US 10-year yield reached the psychological threshold of 3% on Monday for the first time since November 2018. The China 10 Years Governement Bond has now a 3.197% yield, while the France 10 Years Government Bond has a 1.487% yield as of May 2. The Germany 10 years Government Bond has a 0.964% yield as of May 2.
As of today, the Russia 10 Years Government Bond has a 10.100% yield.
At the closing, the Dow Jones rose 0.26% to 33,061 points after losing 1% in the session, while the broad index S&P 500 gained 0.57% to 4,155 pts after a loss of 1.2% an hour earlier. The Nasdaq Composite, rich in technology and biotech stocks, recovered 1.63% to 12,536 pts, after its plunge of more than 4% on Friday against a backdrop of disappointment on the results and forecasts of several GAFA, including Amazon (+0.18% after -14% on friday) and Apple (-0.2% after -3.6% on friday).
The month of April ended with sharp declines for the US stock indices, nearly 5% for the Dow Jones, nearly 9% for the S&P 500 and more than 13% for the Nasdaq, back to the lowest in a year. The Nasdaq is now giving up nearly 22% from its November 2021 record, now trading in a real bear market.
The week ahead will still be loaded with U.S. corporate results for Q1 awaited later today, but the most anticipated event is of course the Fed’s announcements on Wednesday evening after its two-day meeting. On Friday, markets will follow the March employment figures in the United States, to be published by the U.S. Bureau of Labor Statistics.
Investors also remain nervous about the geopolitical situation which is increasingly degraded by the conflict in Ukraine, not to mention the wave of Omicron variant in China that is weighing on economic growth. Manufacturing activity declined more than expected in China in April due to the lockdown in Shanghai and restrictions in Beijing. Chinese authorities said the “decline in production and demand” deepened last month.
In the United States, growth in manufacturing activity also slowed in April, while remaining largely expanding, according to the monthly survey of the Institute for Supply Management (ISM) published on Monday. The ISM manufacturing index fell to 55.4, the lowest since September 2020, from 57.1 in March, while economists had expected an improvement to 57.5.
U.S. inflation again reached a record, surging to 8.5% in March on annual terms, after 7.9% in February. This is the highest level of inflation never seen in the United States since December 1981 and the dynamic has been here for months. U.S. inflation already reached 7.5% in January after hitting 7% in December 2021, 6.8% in November and 6.2% in October.
Read also : How to invest in gold
Gold prices have been surging since January, amid geopolitical tensions and inflation worries in Europe and the United States. On May 2, gold prices hit a high $ 1,888 per troy ounce and was at $ 1,864.60 at 06:17 PM NY Time. On March 8, in the morning, gold prices crossed $ 2,000 per troy ounce, hitting $ 2,039 per troy, a record since August 2020.
Gold is a good asset in tough times. In almost any crisis, it shows growth. The yellow metal has always been a great hedge against inflation because it rises in price when the cost of living standards rises.
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