S&P500
The US market fell sharply at the week's close. The dollar is strengthening greatly as a defensive asset. Conflict in Eastern Europe comes to an end.
The US market showed a very strong decline at the week's close. The Dow Jones shed 2.2%, the NASDAQ Composite declined by 2.6%, and the S&P500 decreased by 2.8%.
French President Emmanuel Macron on Sunday secured his second term by defeating far-right leader Marine Le Pen in presidential elections.
Oil falls markedly by 4% on Monday. Brent is trading at $102 on a falling US market.
The S&P500 is at 4,272, staying in the 4,230–4,310 range.
The US market showed a strong fall for two days in a row. At the end of last week, a total of around -5% over two days for the indices. The US market is down - and will probably reach the lows of March. Yet it is not yet a global reversal downwards but only a deep correction.
The reason for the market fall is the Fed's hard turn towards a rate hike trend and a tightening of monetary policy in general. At the start of May we expect a +0.5% hike in the dollar rate and a monetary supply contraction at a rate of $95bn per month. A Fed rate hike of +0.5% is also expected at the next meeting. The reason for the Fed's inflexibility is also obvious - inflation to +8% p.a. in the US. This level of inflation is unacceptable for the US economy on a long-term basis.
On 28 April the first US GDP report for the 1st quarter will be released. The growth rate is expected to fall sharply to +1+1.5% from +6.9% in the previous quarter. At the same time the GDP deflator is forecast to be +7.1%.
The RCE inflation report for March will be released on Friday.
The US dollar index is trading at 101.40. It is likely to remain in the range of 101.00-101.70. The dollar has broken upwards through the 100 mark on the index. The dollar has strengthened very strongly in recent weeks against the yen, to 20-year highs. The pound has fallen sharply against the dollar over the last two days, to 300 points. At the opening of the week the euro fell heavily against the dollar to 1.0710. However, the euro is not going into a collapse yet. The strengthening of the dollar has an obvious reason - the dollar retains its role as the world's main defensive asset.
The USD/CAD pair is trading at 1.2730. It is likely to stay in the range of 1.2650 - 1.2850. The pair rises sharply on a rising dollar and declining oil.
To sum up, we wait for the US GDP report and for the US market to stop declining, then we make our decisions. Right now, buying is too risky.
Conflict in Eastern Europe:
The tension in the conflict has not abated. Since April 19, Russian forces have been carrying out intensive shelling of targets in various Ukrainian towns and cities. Last night there were strikes on the Dnipro River, earlier on Odessa and other cities. Russian forces have been trying to launch a major offensive since April 19. Ukrainian forces are on the defensive.
The West is actively stepping up military aid to Ukraine. US Secretary of State Blinken and Secretary of Defence were in Kyiv yesterday. They brought an additional aid package of 330m dollars. In the new week, the US Congress will finally pass the Lend-Lease Act for Ukraine. This will still greatly increase and accelerate the supply of weapons, including heavy weapons (howitzers, shells) and drones. France and Britain are also stepping up military aid. German Prime Minister Scholz has been sharply criticised for trying not to deliver heavy equipment to Ukraine. However, the country is ready to allocate 1 billion euros in aid to Kiev. The next two weeks will be crucial.
The Russia-Ukraine negotiations are at a deadlock. In fact, Russia demands that Kiev recognise the DNR-LNR and Crimea as a precondition. Kiev is demanding a ceasefire and withdrawal of Russian troops to the February 23 line as a precondition. Moscow is trying to make an offensive
