Subsequent statements by the Federal Reserve representatives seem to calm the market and temper expectations of interest rate increases in the US caused by rising inflation. As a result, investors are returning to riskier assets. Today, the focus will be on US retail sales and industrial production data.
On Thursday, the Dow Jones rose 1.3 percent, the S&P 500 rose 1.2 percent, and the Nasdaq gained 0.7 percent. The opening of Friday's trading in the U.S. points to further strong gains. Dow Jones futures rose by over 150 points, extending the rally from the previous session. Thus, the indexes are trying to reduce the scale of the weekly declines.
Moderate commodity prices and comments from several Fed officials helped dissipate inflation concerns while investors focus on the prospects for a strong economic rebound.
Pandemic in India pushes oil prices lower
WTI crude oil futures slid more than 3 percent yesterday and are on track for their biggest weekly decline since early April this year. This comes amid deepening concerns about the coronavirus situation in India. The head of India's main health agency said restrictions on the country's shutdown should remain in place in all districts for another 6-8 weeks.
OPEC+ cut its Q2 global oil demand estimate by 300,000 barrels a day due to the viral situation in India, while it began a gradual easing of oil production restrictions this month, pumping an additional 350,000 barrels a day and saying demand will rise by 5.95 million barrels a day this year. Meanwhile, the EIA predicts that demand for oil will outstrip supply.
In the US, meanwhile, President Joe Biden announced that fuel supplies should return to normal starting next weekend. Recall that there were shortages in some parts of the country due to the closure of pipelines of the Colonial Pipeline company.
Gold time
In an environment of elevated inflation and no interest rate hike, attention may once again focus on gold. On Friday, bullion prices rose slightly to their highest level in about 3 months at $1,834 per ounce.
In the background of the rises, it is worth noting the general weakening of the dollar and the deepening negative real interest rates in the USA. If gold is to be a hedge against inflation, there may not be a better time to prove this thesis.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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