Gold's recovery helping lift silver
12 Aug 2022Gold’s recovery since the second half of July has helped lift silver as well. Silver, which derives more than half of its demand from industrial applications, is still highly correlated with gold. Since March, silver’s weakness was exacerbated by the pullback in industrial metals over and above the weakness in gold. Silver still has much ground to regain before it reaches its recent highs from March and April.
European stocks await inflation data
12 Aug 2022European stocks benefitted from the recovery in risk sentiment in the second half of July but have made a lukewarm start to August. All eyes are now on the next inflation print. The next Consumer Price Index (CPI) inflation print for Eurozone is expected on Thursday 18 August 2022. A lower than consensus inflation print could trigger further rally in European stocks.
Gold recovers as dollar weakens
05 Aug 2022Strength in the US dollar has seemingly held gold back despite the boost the yellow metal should be getting from persistently rising levels of inflation. The US dollar, however, retreated in the second half of July easing some of the headwinds facing gold. Gold’s recovery, as expected, is pulling up other precious metals as well with the most notable impact being on silver and platinum.
July was a good month for equities
05 Aug 2022According to FactSet’s earnings insight as of 29 July 2022, 56% of the S&P 500 companies had reported their second quarter earnings. Out of these, 73% reported positive earnings surprises, i.e., earnings above expectations. Moreover, with the Federal Reserve (Fed) indicating rate rises may slow down in the coming months, equity markets have breathed a sigh of relief. The S&P 500 Index was up 9.1% in July while the NASDAQ 100 Index was up 12.5%.
Industrial metals make a slight recovery
29 Jul 2022Industrial metals have been on a downward slide since their peak in March as fears of an impending recession have hit the cyclical asset class. Nevertheless, a slight recovery in the second half of July could signal a shift in sentiment.
All eyes on a very crucial earnings season
29 Jul 2022According to FactSet’s earnings insight as of 22 July 2022, “For Q2 2022 (with 21% S&P 500 companies reporting actual results), 68% of S&P 500 companies have reported a positive EPS surprise and 65% of S&P 500 companies have reported a positive revenue surprise.” Healthy corporate earnings could prove to be the trigger stocks need to bounce back from the bearishness this year.
COMMODITIES: Volatility continues in oil prices
22 Jul 2022Oil prices could cool down because of the following: 1. More recessionary fears, 2. Increased supply from the organization of the petroleum exporting countries (OPEC), 3. Further lockdowns in China. For now, markets are reacting to developments on each front which is why we continue to see volatility but no meaningful move in either direction.
EQUITIES: US stocks bounce back as sentiment improves
22 Jul 2022A slight improvement in risk sentiment in US stocks can be attributed to a combination of three things: 1. Markets overreacted to the latest US inflation print expecting the Federal Reserve to raise rates by 1% in July. As expectations moderated to a 75basis points (bps) increase, markets breathed a sigh of relief. 2. Earnings so far for US companies do not paint a picture of recession. And 3. Many investors are still looking to buy at current, and relatively more attractive, valuations following the sell-off in the first six months of the year.
Dark clouds loom over the silver lining
08 Jul 2022Silver has endured larger losses this year on account of its industrial properties. Even though silver typically demonstrates a high correlation with gold historically, its use as an industrial metal can dictate prices especially when gold is unable to lift it meaningfully. Last two months have precisely been such an environment. Industrial metals have retreated from their highs in March as Chinese manufacturing activity has slowed down. Sentiment has suffered further with growing fears of recession. This industrial effect on precious metals becomes even clearer when we observe the price behaviour of platinum and palladium, both of which are the most industrial in nature within the group.
Cotton prices post steep declines
08 Jul 2022Owing to its cyclical nature, cotton’s recent price correction has coincided with the general correction across commodity markets owing to concerns over a global macro slowdown. Cotton prices had previously benefitted from higher oil prices that rendered synthetic fibres, that compete with cotton fibres, more expensive. But now, lockdowns in China (the biggest consumer of US cotton), have had a negative impact on demand. This was evident from US cotton export sales that declined to their lowest level in the current marketing year. One factor weighing on sentiment relates to concerns that China might buy less US cotton in the future after a law came into force in the US that bans the import of goods from the Chinese province of Xinjiang due to allegations that forced labour is being practised there, which China denies. Interestingly Xinjiang is also an important producer of cotton.