Fri, August 19, 2022

Weekly Overview: Stocks, Crypto, Forex, Commodities Jul 8

Weekly Overview

Worldwide politics affect the market’s ecosystem a lot. Our weekly overview analyses this week’s stocks, crypto, forex, and commodities and determines future trends.

Stocks Weekly Overview

Stock futures fell early Friday after a rebound on Wall Street as investors awaited Friday’s key jobs report.

Futures linked to the Dow Jones Industrial Average fell 91 points or 0.29%. S&P 500 futures were down 0.36% and Nasdaq 100 futures were down 0.44%.

Shares of Levi Strauss surged more than 3% after its IPO. The retailer reported quarterly earnings that beat estimates and raised its dividend.

GameStop fell about 5% in after-hours trading as the company fired its chief financial officer and announced layoffs as part of a turnaround plan. The video game retailer rose 15% in the regular session a day after it announced that its board had approved a 4-for-1 stock split.

In successful trading on Thursday, the S&P 500 rose for four straight days, its longest year to date, according to data from Bespoke Investment Group. The index is now down about 19% from its all-time high in January.

How Have Energy Stocks Performed?

Energy stocks led gains in regular trading as oil prices reversed from their recent slump. Exxon Mobil rose nearly 3.2% and Occidental rose nearly 4%. The chipmaker boosted the tech sector after Samsung’s strong gains.

The June jobs report, due on Friday, is expected to show another month of strong hiring. The labor market defies any signs of an impending recession or economic slowdown. 

Economists expect the U.S. economy to add 250,000 jobs last month and the unemployment rate to remain unchanged at 3.6%, according to the Dow.

Employers added 390,000 jobs in May, better than economists had expected.

The S&P 500 gained about 2% in the holiday-shortened week and is on track for its second straight weekly gain in the past three years.

The Dow Jones Industrial Average and the tech-heavy Nasdaq Composite rose 0.92% and 4.4%, respectively, for the week. Both indices also had their second positive week in the past three weeks.

Crypto Weekly Overview

At 20:02 GMT on Thursday, bitcoin was up 6.06% at $21,792.16, up $1,244.71 from its previous close.

Bitcoin is up 23.9 percent from its yearly low of $17,592.78 on June 18.

Ether, a token tied to the ethereum blockchain network, rose 5.21 percent to $1,247.79 on Thursday, up $61.78 from its previous close.

Bitcoin is on track for its best weekly gain since October, helped by a general recovery in risk appetite in global markets.

The largest cryptocurrency by market capitalization was up more than 13% in Singapore as of 11:50 a.m. Friday — the biggest gain for this period since 2021 if the trend continues.

Other tokens like Ethereum, Avalanche, and Solana have also performed strongly over the past few days. It has helped push the total cryptocurrency market value back above $1 trillion.

Given the positive correlation between the two asset classes, the stock rally has provided some much-needed relief for the beleaguered coin. Bitcoin is still set to fall more than 50% in 2022, driven by a tightening of monetary policy and a series of explosions in the digital asset space, which remains sober after a focus on leverage.

Forex Weekly Overview

Safe-haven demand pushed the yen and dollar higher on Friday after former Japanese Prime Minister Shinzo Abe was shot while campaigning for the general election.

The euro fell to a 20-year low against the dollar and faces its worst week in four months as Europe prepares to slide into recession while markets await U.S. jobs data.

Prime Minister Fumio Kishida said Abe was seriously injured after he was shot dead in the western city of Nara on Friday.

The yen rose as much as 0.5% on the news. It was up 0.2% at 135.81 per dollar by 08:10 GMT.

The euro fell 3.2% against the dollar this week as investors worried that an energy crisis triggered by uncertainty over Russian gas supplies could tip the continent into recession.

The euro was down 0.6% at $1.01005 after hitting a fresh two-year low of $1.00720. Its decline helped push the U.S. dollar index to a two-year high. On Friday, the dollar was up 0.5% at 107.560 against a basket of currencies.

Sterling was set to fall for a second week in a row, but traders said its 1.8% loss this week was relatively modest amid political chaos in Britain when Prime Minister Boris Johnson resigned. Sterling was down 0.65% on the day at $1.1948.

Should We Expect a Recession?

While higher energy prices appeared to be undermining confidence and growth momentum in Europe, investors were also concerned about the U.S. economy, despite the latest data that was better than expected.

U.S. nonfarm payrolls are the next indicator to be released at 12:30 GMT, with economists forecasting an increase of around 268,000 jobs in June.

Stronger data could ease some recession fears but could help rate hike bets and boost the dollar.

Two of the Fed’s most outspoken hawks said on Thursday they would support another 75 basis point rate hike later this month, but would then downgrade to a slower pace. 

The dollar also performed well in emerging markets, sending several Asian currencies to multi-year lows, with the Indian rupee slumping to an all-time low this week.

Commodities Weekly Overview

Oil prices slipped in early Asian trade on Friday after recovering in the previous session, as investors remained torn between worries about tight global supplies and concerns that a recession could dampen oil demand.

Brent crude futures fell 23 cents to $104.42 a barrel, down from Thursday’s nearly 4% rally. U.S. West Texas Intermediate crude fell 36 cents to $102.37 after rising 4.2% a day earlier.

Both contracts are likely to fall for a second week in a row. A sharp sell-off on Tuesday has marked trading this week, with WTI down 8% and Brent down 9%. Brent’s $10.73 drop was the third-biggest drop for the contract since it began trading in 1988.

Central banks around the world are raising interest rates to curb inflation, fueling fears that rising borrowing costs could push countries into recession and reduce oil demand.

Deliveries, the best indicator of U.S. consumer demand, have risen to 20.5 million barrels per day in the past week, U.S. data from the U.S. Energy Information Administration (EIA) showed on Thursday. However, overall demand for gasoline and distillates fell by more than 5% over the past 4 weeks compared to the same period last year.

U.S. crude inventories rose by 8.2 million barrels in the week ended July 1, EIA data showed.

The sell-off was so large that prices plummeted along the entire futures curve. For example, Brent crude for December 2023 fell 8.8% on Tuesday, at its lowest level since March, and almost in line with nearby prices.

Market experts interpreted the drop as a sign that some oil producers have sold longer-term contracts to secure supplies. Although such volumes have been modest so far, they could weigh on near-term futures.

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