It was a week full of important macro news, but the topics were old: inflation and rate hikes. For too long central bankers were turning their eyes from the amount of money they put into the system, until they reached the point where immediate and strong reaction was more than necessary. Many economists are asking if current measures should have been implemented last year, and that at this moment these measures need to be doubled in strength to put widening inflation under control. Central bankers were pointing to the word “transitory” when speaking about inflation, while markets were preparing for what is coming, and especially, what is yet to come.
Pressured by historically high inflation levels, FED has increased interest rates by 50 basis points during this week. There are comments from FED officials that they will probably raise interest rates also in the near future, but this increase will not be 75 basis points, as some market analysts were pointing. Still, if we take theory of market efficiency into account, the rise in the USD yield curve during the week is pointing that there is still no end to interest rate increases in the US. Cooling down rising prices in the environment of low economic output will now be a very hard task for the US monetary authorities.
During the previous week several other central banks raised interest rates. One of them is the Bank of England, which increased the reference rate by 25 basis points, to 1%, and to the highest level in the last 13 years. ECB is still holding, but it is only a matter of time when they will also be pushed to the stage where rate hike is inevitable.
Thursday was a day which was promising that markets are ready for short stabilization, however, Friday was sort of a sell-off day. Equity market continued with weekly losses, with Dow down by 3%, Nasdaq by 5% ,which were the highest losses from the year 2020. Sell-off was led by the tech industry, where Amazon lost 7.1% in share value, Meta was down by 5.8%, Microsoft by 4.7%.
In the stagflation environment it is hard to stay optimistic. Economists are stressing that the downtrend has just started and that we will see in the future re-evaluation of all assets. They are probably right, but where new market equilibrium for different asset classes stands, is to be seen during the course of this year. At this moment investors are seeking for more stable income, placing their funds with equities which could bring stable dividends.
BTCUSD
Crypto market
Crypto market continues to lose its strength, currently due to two main reasons. One is related to FED`s tighter monetary policy which aims to withdraw liquidity from the market in order to fight inflation. Second topic is related to investor’s sentiment, where they are searching for more stable income in uncertain economic times. During the week Bitcoin was struggling to sustain short term support at $38K, however, during Friday’s trading it slipped down to long term support at $35K. This slip was heavily supported by too much leverage on the market. As per news reports, during Friday`s trading over $400 million of crypto-traded futures were liquidated through margin calls, which additionally pushed the price to the downside. Within a single week more than $70 billion was wiped out from the crypto market cap.
TOTAL
Pressured by historically high inflation levels, FED has increased interest rates by 50 basis points during this week. There are comments from FED officials that they will probably raise interest rates also in the near future, but this increase will not be 75 basis points, as some market analysts were pointing. Still, if we take theory of market efficiency into account, the rise in the USD yield curve during the week is pointing that there is still no end to interest rate increases in the US. Cooling down rising prices in the environment of low economic output will now be a very hard task for the US monetary authorities.
During the previous week several other central banks raised interest rates. One of them is the Bank of England, which increased the reference rate by 25 basis points, to 1%, and to the highest level in the last 13 years. ECB is still holding, but it is only a matter of time when they will also be pushed to the stage where rate hike is inevitable.
Thursday was a day which was promising that markets are ready for short stabilization, however, Friday was sort of a sell-off day. Equity market continued with weekly losses, with Dow down by 3%, Nasdaq by 5% ,which were the highest losses from the year 2020. Sell-off was led by the tech industry, where Amazon lost 7.1% in share value, Meta was down by 5.8%, Microsoft by 4.7%.
In the stagflation environment it is hard to stay optimistic. Economists are stressing that the downtrend has just started and that we will see in the future re-evaluation of all assets. They are probably right, but where new market equilibrium for different asset classes stands, is to be seen during the course of this year. At this moment investors are seeking for more stable income, placing their funds with equities which could bring stable dividends.
BTCUSD
Crypto market
Crypto market continues to lose its strength, currently due to two main reasons. One is related to FED`s tighter monetary policy which aims to withdraw liquidity from the market in order to fight inflation. Second topic is related to investor’s sentiment, where they are searching for more stable income in uncertain economic times. During the week Bitcoin was struggling to sustain short term support at $38K, however, during Friday’s trading it slipped down to long term support at $35K. This slip was heavily supported by too much leverage on the market. As per news reports, during Friday`s trading over $400 million of crypto-traded futures were liquidated through margin calls, which additionally pushed the price to the downside. Within a single week more than $70 billion was wiped out from the crypto market cap.
TOTAL