Market news & insights

Slowing Growth and Potential Rate Cuts: Recent economic data suggests a slowdown in growth, contrary to earlier expectations of reaccelerating growth and inflation. Federal Reserve Chairman Jerome Powell's statements and recent economic indicators point towards the possibility of lower policy rates in the near future. Key indicators, such as the softening in job markets and overall economic activity, indicate that growth is decelerating rather than accelerating.

Core inflation remains above the Fed's target but is showing signs of a gradual decline, with core CPI at 0.29% month-over-month (MoM) in April. This trend could build the Fed's confidence that inflation is on a downward trajectory, potentially leading to rate cuts starting in July. These data trends have filtered into in the market itself.

The divergence between the S&P and US 2-year has been come very apparent as yields unwind from their hawkish bets that ramped up on Q1 data. That spread is becoming an interesting trade – it could close as fast as it has opened if data misses. On the data – what is core to the Fed’s view?

Inflation Trends: Core inflation remains elevated but shows signs of slowing. The April core CPI increase of 0.29% MoM aligns with the Fed's expectations of gradual inflation decline. The slow but steady decrease in shelter prices, particularly the owner’s equivalent rent (OER), is a positive sign.

However, the "supercore" non-shelter services sector's inflation is unlikely to slow significantly without a loosening of the labour market and that remains a headwind. That brings us to the next question what is the official views of the Fed? Federal Reserve Outlook: The recent Federal Open Market Committee (FOMC) minutes and statements from Fed officials suggest it still holds a cautious approach.

While there is no major shift towards a hawkish stance, the rhetoric indicates a readiness to cut rates if inflation data supports a premise it’s on a path to a more sustainable level. Yet the view from members is rather mixed, illustrated by the mixed views from members over the past week. Key Statements Vice Chair Philip Jefferson: Jefferson noted that while April's data is encouraging, it is too early to determine if the slowdown in inflation is sustainable.

He emphasized the current restrictive monetary policy and refrained from predicting when rate cuts might begin, stressing the importance of assessing incoming economic data and the balance of risks. Vice Chair of Supervision Michael Barr: Barr expressed disappointment with Q1 inflation readings, which did not increase his confidence in easing monetary policy. He reinforced the message that rate cuts are on hold until there's clear evidence that inflation will return to the 2% target.

Cleveland Fed President Loretta Mester: Mester anticipates a gradual decline in inflation this year but acknowledges that it will be slower than expected. She no longer expects three rate cuts this year and mentioned that the Fed is prepared to hold rates steady or raise them if inflation does not improve as anticipated. San Francisco Fed President Mary Daly: Daly sees no need for rate hikes but also lacks confidence that inflation is decreasing towards 2%.

She sees no urgency to cut rates, echoing the broader sentiment of caution among Fed officials. The conclusion from all this is that the Fed is still giving itself time. It’s of the view that the restrictive policy will need more time to work, suggesting a prolonged period of higher interest rates to combat inflation effectively and despite the movements in the bond market and USD.

Traders in the fed fund futures are still trading a full 50 basis points higher as of now compared to their bets at the March meeting. (Black v Blue line) Other data that matters: GDP and Consumer Spending: Despite strong GDP growth in the latter half of 2023, real GDP growth slowed significantly to 1.6% annualized in Q1 2024. Final private domestic demand was sustained primarily by consumer services spending, even as real goods spending declined. The weakening consumer spending on goods is beginning to spill over into the services sector, indicating broader consumer weakness.

Manufacturing and Investment: Data on manufacturing and business investment remains weak. Manufacturing production has stagnated, and orders for durable goods have not shown significant improvement. Residential fixed investment is also slowing, with housing starts and building permits both declining in April.

Housing Market: Existing home sales data, to be released soon, is expected to show a modest rebound from the previous month. However, ongoing weakness in the housing market, influenced by higher mortgage rates, remains a concern. Hot Copper – Too hot?

Copper has experienced significant price movements, with several key factors contributing to the recent trends in copper prices, spreads, and inventory levels. The following points provide an in-depth analysis of the forces at play: Tighter Physical Copper Market: Last week's record highs in COMEX and SHFE copper prices, alongside the COMEX-LME copper spreads indicate a very tight physical copper market. This saw the LME copper price smash a new record all-time high (above US$11,000 a tonne).

The dislocation in copper price benchmarks, such as the COMEX-LME spread, typically leads to adjustments in physical flows. However, current conditions are proving challenging, with generally low copper inventories and logistical issues. For example, traders in China are facing tight shipping schedules, making it difficult to move copper to the US.

Suggesting the price will hold in the interim De-commoditisation of Commodities: Deliverable Metal Scarcity: The elevated COMEX copper prices relative to other benchmarks can be partly attributed to the lack of deliverable metal. Only 17% of the metal in LME warehouses originates from countries with COMEX-approved brands. This scarcity of deliverable inventory means that most of the available copper cannot be used to satisfy COMEX contracts, driving up the COMEX copper premium.

RIO, BHP and the like all benefit from this. Influence of Financial Flows: Naturally this kind of move brings highten investor and trader interest. COMEX copper futures are experiencing all-time highs in long positioning and record open interest in copper options.

This surge in financial flows has pushed COMEX copper prices higher compared to other benchmarks and has been more resistant to reversal. What next? The tight inventory situation is likely to persist, especially if logistical challenges and shipping delays continue.

This will maintain upward pressure on prices and could lead to further dislocations between different copper price benchmarks. Efforts to alleviate bottlenecks will be crucial in normalizing price spreads and stabilizing the market. Any improvement in shipping schedules or inventory replenishment could ease some of the current tensions, but we do not hold our breathe for this to occur any time soon.

Conclusion The recent record highs in copper prices and spreads underscore a complex interplay of tight physical markets, and significant financial flows. Traders should closely monitor these dynamics and adapt their positions to capitalise on potential switches and further squeezes. But in the main Dr.

Copper is hot and likely to remain so until supply catches up.

The transportation of the world is becoming one of the most interesting trading places in markets as we clearly have a structural long-term change coming as the world moves from the black stuff (oil) to electricity. But the trader question is – what’s happening in these markets now? The black stuff - Oil Oil prices have softened due to several bearish factors impacting demand, inventories, and refining margins in the last few week and despite some easing of geopolitical risks, concerns remain.

Lets run through the key issues. Inventories and Demand Global Inventories: April restocking has continued into May, with a nearly 10 million barrel increase last week alone, bringing the month-to-date (MTD) build to over 17 million barrels. The US, Europe, and Japan all recorded stock builds in crude oil and refined products.

However we need to put this into perspective – total stockpiling is sit well below historical averages across all major regions. US Inventories: US crude oil inventories increased by 1.8 million barrels last week, expectations were for drawdown as we approach peak driving season. While gasoline and ethanol saw modest draws, other products experienced large stock builds – this likely comes down to demand.

Demand: US oil demand remains weak on a four-week moving average (4WMA) basis, though there was a slight uptick in weekly gasoline demand. However, this needs to be consistent to impact overall demand positively. Couple that with the fact International Energy Agency (IEA) has revised its 2024 oil demand growth forecast down to 1.07 million barrels per day (b/d), a decrease of 0.14 million b/d.

This slower growth trajectory is expected to continue into 2025, with demand growth predicted to decelerate to 0.7 million b/d. Prices positioning Price Activity: Money managers have been liquidating net long positions in crude oil, with ratios of gross longs to gross shorts for Brent and WTI significantly declining. This reflects a bearish outlook the but speculative bearish view has closed to a holding pattern.

The Outlook: Pricing and forecasting suggest a continued decline in prices, with Brent expected to average $86 per barrel in Q2 2024, but dropping to the $70s in the second half of the year and into the $60s by 2025. WTI is expected to average $82 per barrel in Q2 2024 then $66 by year end and as low as $51 by the end of 2025. Refining Margins and Seasonal Factors Refining Margins: Geopolitical risks and seasonal factors like summer heat and potential hurricanes pose upside risks for refinery margins in the near term.

However, the overall trend is towards weakening fundamentals and thus further margin squeezes. Seasonal Demand: With the Memorial Day weekend approaching, traditionally the start of the US driving season, there is hope for increased gasoline demand. However the longer term demand trend for gasoline remains soft as explained.

This remains uncertain and dependent on consistent weekly data. Other Factors Technical Support: Given the bearish fundamentals and the current positioning, technical support for oil prices appears weak. Options market data show declining interest and implied volatility has softened as the match lower has become more ordered.

Overall, the oil market is facing bearish pressures from high inventories, weak demand indicators, and reduced speculative interest, with only limited near-term upside risks. The focus remains on potential demand increases during the summer driving season and any unexpected geopolitical developments that could disrupt supply. The elephant in the room as ever remains OPEC.

With its 27% control of global oil markets further cuts to supply that have taken effect over the past 24 month will only get bigger. The Battery Stuff - Lithium Before we dive into the lithium story in depth, we need to first dive into the geopolitical impacts on the market and their effects on not just price but future developments. Let us review the impact the Inflation Reduction Act (IRA) is having on the lithium Supply Chain The IRA is attempting to reduce dependence on China for electric vehicle (EV) battery production by incentivising the sourcing of critical minerals, such as lithium, from Free Trade Agreement (FTA) countries and non-Foreign Entities of Concern (non-FEoC) supply chains.

Here are some of the additional parts of the IRA that are augmenting the market EV Tax Credit: tax credit of up to $7,500 for EVs, with half of this ($3,750) contingent on sourcing critical minerals (like lithium) from countries with which the U.S. has a Free Trade Agreement (FTA), - Australia, South Korea, and Chile. 45X Tax Credit: Lithium chemical producers benefit from a 10% production tax credit applied to all operating expenses (opex), significantly supporting their operations and potentially lowering costs. The thing is – China has shown it is still the most efficient player in developing, manufacturing and producing EVs’. That however hasn’t stopped the Biden Administration ploughing on with the IRA.

China currently dominates the downstream EV battery production market, controlling around 80% of gigafactory production. However, China’s upstream control of raw minerals is limited to about 17% of the global supply. By incentivising the sourcing of lithium and other critical minerals from FTA countries, the IRA aims to diversify and secure the supply chain away from Chinese dominance.

However, this immediately puts a price premium in ex-China sources as it incentivises and realistically forces firms to seek FTA and non-FEOC so they comply with the IRA. There is also an argument that Independence Group (IGO) for example used the IRA as rationale for the Kwinana downstream project as the pricing of the project was partially based on ex-China price premiums. A price premium of $3,000 per ton for lithium hydroxide (LiOH) could make projects with higher capex but lower internal rates of return (IRR) financially viable.

The flip side. The strict IRA rules E for the tax credit may result in fewer EVs meeting the criteria, as they must source a significant portion of their battery components from specified countries. This could reduce the number of qualifying EVs in the market, influencing manufacturers to adapt their supply chains to meet the new standards.

In short, the ex-China price premium is likely to increase, reflecting the growing demand for compliant minerals. This strategic move is expected to have significant implications for the global EV market and the positioning of the United States within it.

The Society for Worldwide Interbank Financial Telecommunication, legally S.W.I.F.T. SC, is a Belgian cooperative society providing services related to the execution of financial transactions and payments between banks worldwide. Its principal function is to serve as the main messaging network through which international payments are initiated.

It also sells software and services to financial institutions, mostly for use on its proprietary "SWIFTNet". Its important to understand that money is not moved through the SWIFT system but most importantly is the data attributed to the money that is moved through this medium. In other words, without SWIFT the institutions wouldn’t know who and for what reason is a transaction is being made.

For example; if you are sending money from country to country, SWIFT would inform the recipient bank that is getting the money, to expect a certain sum, from a certain bank. So its an extremely important step that will be taken away from Russia. If you do not have that information flow; you simply cannot do any international transactions.

SWIFT welcomes the public launch of the New Payments Platform (NPP) in Australia, which is set to revolutionise the way payments are made domestically. SWIFT has helped to design, build, test and deliver the NPP and will play a key role in operating the infrastructure for the NPP. The NPP’s paradigm-shifting financial architecture has been designed and constructed to fundamentally improve how consumers, businesses and governments transact with one another.

The key features of the NPP include: 24/7 instant payments and real-time line-by-line settlement via the Reserve Bank of Australia’s Fast Settlement Service PayID, the new and easy way to link a financial account with an easy-to-remember identifier such as a mobile phone number, email address or ABN for businesses Open access platform that truly empowers innovation through competition Overlay services framework that will provide new value services to Australian consumers, businesses and government Russia’s SWIFT Sanction Since the invasion of Russia, many countries have joined forces in order to impose heavy sanctions on Russia. Some of these actions are to limit, deter and coerce Russia or Vladimir Putin into changing his strong stance in the war against Ukraine. These sanctions would be felt throughout all classes of Russia’s community and its corporate arm.

One popular sanction has been to remove Russia from the SWIFT messaging system, with the intention to stop any Russian companies from doing international business, which in turn would hurt Russia’s economy and potentially turn Russian loyalists against Mr. Putin and force him into an unlikely reversal of the war. Although this is somewhat looked upon as a key destabilizing strategy by the West, there are some that feel the move is mostly symbolic.

EU bars 7 Russian banks from SWIFT, but spares those in Energy (Reuters). The European Union said on Wednesday (2 nd march) it was excluding seven Russian banks from the SWIFT messaging system, but stopped short of including those handling energy payments, in the latest sanctions imposed on Russia over its invasion of Ukraine. VTB Bank PJSC and Bank Rossiya are among the banks that face a ban from the messaging system.

The other institutions included on the EU list are Bank Otkritie, Novikombank, Promsvyazbank PJSC, Sovcombank PJSC and VEB.RF, said the officials, who asked not to be identified because the decision was private. European Union ambassadors agreed to spared the nation’s biggest lender Sberbank PJSC and a bank part-owned by Russian gas giant Gazprom PJSC. Would it work: Professor of Financial Economics at the University of Loughborough University, Alistair Milne, explains why he is sceptical of the sanction. “Russia’s exclusion from the international payments messaging system Swift, is presented as a powerful means of undermining its economy.

But for a payment’s expert such as myself, this is something of a myth.” He continues, “The reality, however, is that limiting access to Swift is less practically effective than most media coverage supposes. It is an important symbol of global repudiation of Russia’s exercise of military force, but not much more. It is other measures, such as blocking the central bank of the Russian Federation from transacting internationally, which is undermining confidence in the Rouble.” “There is no fundamental problem with transferring funds using some other secure messaging systems.

Russian banks might, for example, instead arrange payments using the SPFS system, which was established after the 2014 invasion of Crimea by the Russian central bank. This is currently used by a handful of international banks in Germany and Switzerland linked to Russian banks.” “Or they could use the CIPS network, which was created by the People’s Bank of China for the purpose of cross-border payments with indirect participants in many countries. They could even use WhatsApp to instruct the necessary transactions.” Leaving room for negotiation?

The EU has avoided the sanctioning of all Russia banks, specially those that use SWIFT in the energy industry. This might be crucial as they seem to be trying to limit Russia, but at the same time keep the door ajar to be able to negotitate energy deals, which, the West are hugely dependednt on. Another thing to note is payments for Russian energy exports, for example to Gazprom, are even less Swift-dependent.

When operators buy oil or gas from Gazprom, they make payments in either euro or US dollars into bank accounts held by the Russian energy company. So if the intention of sanctions is to block payments for Russian gas, the tool is not Swift; it is sanctions on Gazprom and its banking facilities. Perhaps this could be something that is visited in the future.

The absence of Sberbank PJSC and Gazprombank shows the continuing level of concern over the consequences for Europe from a financial isolation of Russia spilling over into the global economy, especially when it comes to energy supplies. The bloc is also worried Russia could retaliate by cutting deliveries. Sources: Reuters, Wikipedia, Loughborugh University, Bloomberg, swift.com

Last week, Russia took a step that not many people thought it would take – they invaded Ukraine. Even though the tensions have been building in the region since the annexation of Crimea in February 2014, not many people thought Vladimir Putin would take the step to invade a sovereign nation. Five days on from the start of the invasion, we have already seen countries around the world condemn Russia’s actions and announce tough sanctions against the largest country in the world.

None of those have yet made any difference to their actions, as they continue their invasion. However, their actions have already impacted their economy - and it will most likely get worse. Swift action from the West Over the weekend, the United States, European Union, United Kingdom and other countries agreed to remove a number of Russian banks from The Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, an international payment system which is used by financial institutions around the world. "We commit to ensuring that selected Russian banks are removed from the SWIFT messaging system.

This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally," the European Commission said in a statement following the announcement. The latest move will have a drastic impact on the Russian economy, which is the 11 th largest in the world according to the World Bank data. It is worth pointing out that only one other country has ever been cut off from the SWIFT system – Iran.

The move resulted in Iran losing half of its oil export revenues and 30% of foreign trade. The central bank reacts On Monday, the Bank of Russia announced its key interest rate from 9.5% to 20% to protect the Ruble, as the pressure mounts on the Russian economy following the latest round of sanctions. ''External conditions for the Russian economy have drastically changed. The increase of the key rate will ensure a rise in deposit rates to levels needed to compensate for the increased depreciation and inflation risks.

This is needed to support financial and price stability and protect the savings of citizens from depreciation,'' the Central Bank said in a statement on their website. ''Further key rate decisions will be made taking into account risks posed by external and domestic conditions and the reaction of financial markets, as well as actual and expected inflation movements relative to the target and economic developments over forecast period,'' the statement continued. The Central Bank of Russian Federation interest changes since July 2020 Financial markets Last week we saw the Moscow stock exchange, the MOEX index, plummet by 45% - to a new record low. The index recovered some of the losses last Friday when it was up by 20%.

On Monday, it was announced that the exchange will not open and the Russian Central Bank said that the operating hours of the exchange would be announced on 1 March 2022 before 9:00 Moscow time. MOEX Russia Index The Ruble The Russian currency has been in free fall since the conflict began – reaching the lowest level ever against the US Dollar. US Dollar was trading at around 76 level at the beginning of February vs. the Russian Ruble.

USD/RUB was trading 107.7000 level on Monday – up by around 27%. USD/RUB With the conflict showing no signs of getting resolved any time soon, we will most likely see more impact on the Russian and world economy in the coming weeks and months. Sources: The World Bank, TradingView, Global Rates, The Central Bank of Russian Federation

Investors are currently bracing for further volatility in the global markets as Russia’s troops have been deployed into eastern Ukraine. The heightened tensions between Russia and Ukraine reached a tipping point last week when the Kremlin had officially recognised regions in eastern Ukraine held by separatists (supported by Russia). Russia ordered troops to enter Ukraine on a peacekeeping mission.

The western countries have responded promptly, with the UK and US among the first countries to reprimand Russian actions with their first round of restrictive economic sanctions. The US had unveiled various sanctions targeting Russia, this included limits on sovereign debt and Russia’s two biggest banks, Promsvyazbank and VEB, who both support the military. A statement from The White House described these measures as the “first tranche of swift and severe costs on Russia” and said the Treasury would “determine that any institution in the financial services sector of the Russian Federation economy is a target for further sanctions.” Australia also followed the US's lead and applied sanctions on Russia aimed at the country’s elites and commercial sector, including transport, energy companies and banks.

Investors had a major focus on Energy commodities given Russia’s strong supply of gas to Europe, especially at a time of strong demand and constrained output that has plagued the region for much of the past year. Here are some thoughts from Vivek Dhar, analyst covering energy commodities for CBA, and Shane Oliver, chief economist for AMP Capital. Mr.

Dhar describes the initial US sanctions as relatively tame given they target sovereign debt, which is low for the Russian economy. Instead, Germany’s decision to suspend the certification of the Nord Stream 2 pipeline poses a more serious response to the escalating situation, given it would have eased the region’s gas shortages. “The extent of Russia’s incursion will likely see sanctions escalate in turn. A full‑scale invasion of Ukraine certainly opens the door to sanctions on Russia’s oil and gas exports,” he added, which could push the price of oil beyond $US100 per barrel.

Mr. Oliver believes there was a risk Russia could itself cut off supply of gas to Europe, “with a potential flow-on to oil demand at a time when conflict may threaten supply”, adding to anticipated inflation. Investors are worried about a stagflationary shock to Europe and, to a lesser degree, the global economy.

All in all, the crisis between Russia and Ukraine is still ongoing and there will certainly be further actions taken by countries across the world. As investors' uncertainty slowly rises, the global markets will adjust with every major update. Keeping up to date with other countries’ sanctions and reaction to the invasion can be a rewarding task as opportunities can present themselves.

If you have spotted an opportunity to invest in the global markets and don’t already have a trading account, you can register for an account at GO Markets.

For years, gold has been considered a store of value. As a physical commodity, it cannot be printed like money, and its value is not impacted by interest rate decisions made by a government. Because gold has historically maintained its value over time, it serves as a form of insurance against adverse economic events.

When an adverse event occurs that lingers for a while, investors tend to pile their funds into gold, which drives up its price due to increased demand. There have been many instances in our history, where war has ignited investment into gold. One particular moment in the 21 st century which signaled a strong movement into gold as a safe haven was the unfortunate event which occurred on 9/11.

Another was the Global Financial Crisis in 2008. In both instances gold’s price sored and it returned higher profits than any other financial asset. It’s important to understand at this stage, even though gold has these unique characteristics, it is not a long-term solution for a portfolio hedge or as a safe heaven.

Negative news tends to come after more negative news, which changes investor behaviors and tends to worry investors who in turn would sell their positions in gold, thus sending the price down to original levels or even lower. Some Key Points Safe haven investments offer protection from market downswings. Precious metals, currencies, and stocks from particular sectors have been identified as safe havens in the past.

Safe havens in one period of market volatility may react differently in another, so there is no consistent safe haven other than portfolio diversity. Latest Price Action Prior to Russia’s intentions of an invasion into Ukraine and fears of war, which is creating upheaval in the political landscape in Europe and around the world, gold was steadily rising in a sideways movement. However this past week you would have noticed a sharp price action jump 3% from $1892.00 to $1973.00 USD (see below), a price that we haven’t seen since 1 st of January 2021 and there is a strong feeling that it could push past this figure as Russia ramps up its invasion into eastern Ukraine.

If this happens, we could start to see higher highs as a result, as investors are spooked by the potential turmoil and destabilization. Gold or XAUUSD, can be accessible in different forms. You can purchase gold bullion in a number of ways: through an online dealer, or even a local dealer or collector.

A pawn shop may also sell gold. You are advised to note gold's spot price – the price per ounce right now in the market – as you're buying, so that you can make a fair deal. You could also find access to gold in the following ways: Gold Futures, ETFs that own gold, Mining Stocks, ETFs that own mining stocks, or you if you wish to trade it, you could use CFDs, where you can trade the value of the shiny metal when it goes up or down.

Visit our website here to get started with a CFD trading account and start taking advantage of opportunities. Sources: www.bankrate.com, Investopedia, Tradingview.