Global Markets Newsletter – May 2022

The war in Ukraine keeps on going, increased energy prices fuel inflation further and two countries (Finland and Sweden) applied for joining NATO alliance provoking negative Russian comments. China is having common military patrols with Russia within legal and predetermined borders while the west takes some months to forget its dependency on Russian natural gas.

On the other side of the Atlantic, interest rates grew on May the 4th by 50 basis points culminating to 1% while more rises are being expected as inflation hits 8.3% (from 8.5%) and remains the main issue despite the fact that FED is reducing its balance sheet by selling bonds to banks. Unemployment was announced at historic low levels (3.6%), retail sales were marginally up by 0.9% almost like industrial production (0.9%). New home sales, building permits and existing home sales were decreased during May by 0.2%, 3.2% and 16.6% (MoM) respectively. US GDP for the first quarter of the current year was reduced by 1.5% (from -1.4%).

The European Union strives to have unanimity imposing sanctions to Russia and stop depending on Russian natural gas an oil but the expected year for energy independence is at least 2025. In eurozone economic numbers, the ECB chairman Christine Lagarde reassures that inflation will be controlled but interest rates will not rise until July. Inflation continues to rise reducing growth and, in some countries, increasing deficits and debt. Markets do not show strong buying interest eventhough there is ample liquidity yet, helping more traders rather than long-term investors. Among the major economic releases, consumer confidence (-22 from -21.6), retail sales and business climate decreased while GDP for the first quarter increased by 0.3% (from 0.2%).

The EUR/USD moved towards the 1.05 mark but reacted and inverted the trend to 1.07. This correction is not expected to last as US economy remains stronger and more responsive to inflationary pressures.

We hold excess liquidity awaiting proper timing to invest in US stocks in energy and technology sectors.

S&P-500 (6 month graph)

Source: Investing.com

EuroStoxx-50 (6 month graph)

Source: Investing.com

EUR/USD  (1 year graph)

Source: Investing.com


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