Rising oil prices could trigger a new wave of inflation. The RBA kept interest rates unchanged

The US stock indices were mostly up on Monday as energy stocks rose on higher oil prices after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) unexpectedly cut oil production by 1 million BPD. As the stock market closed Monday, the Dow Jones Index (US30) increased by 0.98%, and the S&P 500 Index (US500) added 0.37%. Technology Index NASDAQ (US100) lost 0.27% yesterday.

In the US, the ISM manufacturing activity index fell to 46.3 in March from 47.7 a month earlier, while the pay-per-view price index fell to 49.2 from 51.3, indicating that the disinflationary trend in the commodities sector also remains unchanged.

Elon Musk believes that interest rate hikes by the Federal Reserve will hurt companies and provoke an economic downturn. The head of Twitter agreed with the opinion of his longtime friend, venture capitalist David Sachs, who pointed out that further Fed interest rate increases could hit banks, commercial real estate, and national debts. According to Sachs, the first stage of the crisis has already begun, with the second and third stages still to come.

Stock markets in Europe were trading Monday without a single dynamic. German DAX (DE30) decreased by 0.31%, and French CAC 40 (FR40) added 0.32%, Spanish IBEX 35 (ES35) was down by 0.81%, British FTSE 100 (UK100) closed yesterday up by 0.54%.

European business activity data showed no significant changes over the last month. Most industries are in contraction territory, and as long as the ECB raises interest rates and tightens the screws on the banking sector, the situation is unlikely to improve anytime soon.

Gold is back to the $2000 an-ounce mark. Gold has a lot of fundamentals for strengthening right now. The banking crisis, the impending recession in the US and Europe, and falling government bond yields on the soon-to-be-completed tightening cycle. In addition, the sanctioning countries are actively getting rid of dollar reserves, increasing gold reserves. There are all preconditions for the continuation of the medium-term upward movement.

Due to voluntary cuts in oil production by OPEC countries, oil prices posted their biggest one-day gain of the year. The US West Texas Intermediate (WTI) ended Monday trading at $80.42, plus 6.3% for the day. Brent closed at $84.93, also plus 6.3% for the day. Traders and analysts are already analyzing what the Federal Reserve will do in terms of raising rates to counter the new inflationary pressure that is almost inevitable because of OPEC's inflated oil price. Analysts are predicting a further rise in quotes, up to $90-100 per barrel.

Asian markets were mostly on the rise yesterday. Japan's Nikkei 225 (JP225) gained 0.52%, China's FTSE China A50 (CHA50) decreased by 0.16%, Hong Kong's Hang Seng (HK50) gained 0.04%, India's NIFTY 50 (IND50) gained 0.22%, and Australia's S&P/ASX 200 (AU200) increased by 0.63% on the day.

The Reserve Bank of Australia (RBA) kept interest rates at 3.6%, signaling a pause in its rate hike cycle. The bank said it wanted to see the full effect of the rate hike and assess Australia's economic prospects while noting that inflation has probably peaked. But with inflation still well above the bank's target range of 2% to 3%, the RBA warned that further monetary tightening might be needed.

The Reserve Bank of New Zealand will hold its monetary policy meeting tomorrow. Investors expect a 0.25% rate hike with a hint of an end to the tightening cycle. New Zealand's GDP fell by 0.6% in the last quarter of 2022, more than the RBNZ forecast in its last report. Meanwhile, GDP growth and inflation are expected to be negative in the first half of 2023 due to disruptions from hurricanes on the North Island.

According to analysts, the Monetary Authority of Singapore (MAS) is likely to tighten monetary policy this month amid continuing price pressures. It should be noted that instead of interest rates, MAS manages policy by allowing the local dollar to rise or fall against the currencies of its major trading partners within an undisclosed range known as the Nominal Effective Exchange Rate of the Singapore dollar. The Reserve Bank of India is also set to meet later this week and is expected to raise interest rates.

S&P 500 (F) (US500) 4,124.51 +15.20 (+0.37%)

Dow Jones (US30)33,601.15 +327.00 (+0.98%)

DAX (DE40) 15,580.92 −47.92 (−0.31%)

FTSE 100 (UK100) 7,673.00 +41.26 (+0.54%)

USD Index 102.04 −0.36 (−0.45%)

• – Australia RBA Interest Rate Decision at 07:30 (GMT+3);
• – Australia RBA Rate Statement at 07:30 (GMT+3);
• – Canada Building Permits (m/m) at 15:30 (GMT+3);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+3).

by JustMarkets, 2023.04.04

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.