It was a slow start to another busy week for financial markets.
Asian shares kicked off the week on a cautious note as investors digested a slew of Chinese economic data. The major standout was the GDP report which revealed that China expanded at an 8.1% annual pace in 2021, though growth slowed 4% in the Q4 amid Covid-19 and property woes. US markets were closed for the Martin Luther King Jr. holiday.
Our trade of the week was the GBPUSD. We expected some action on the Pound thanks to key economic reports from the UK and the threat of more political drama at Westminster. Sterling certainly did not disappoint with bears eventually winning the tug of war to drag the GBPUSD below 1.3600. There were a couple of takeaways from the UK this week with the biggest one being inflation – which soared to a 30 year high. On Tuesday, the dollar regained some strength as treasury yields pushed higher while oil prices rallied to a fresh 7 year high as geopolitical tensions sizzled in the Middle East.
On Wednesday, oil bulls were injected with renewed confidence as both benchmarks hit fresh 7-year highs. Equity bulls were stung by inflation fears as oil prices rallied further. With investors adopting a cautious stance and accessing outlooks for earnings growth, risk aversion swept across the board. Gold prices appreciated aggressively amid the risk-off sentiment along with other safe-haven currencies like the Yen.
Thursday we certainly an eventful day for markets as geopolitical tensions between Russia and Ukraine left investors on edge. Oil markets remained near 7-year highs which fuelled inflation fears while Treasury yields climbed above 1.90% before moderating. In Asia, stocks were helped by a mortgage rate cut in China but US stocks got no love with the S&P500 descending deeper into the abyss.
It was already shaping up to be a terrible week for Wall Street but the disappointing earnings from Netflix delivered a knockout blow. U.S stocks crumbled on Friday, closing out a losing week with the Nasdaq one the biggest casualties. The Nasdaq tumbled over 2.5% on Friday while the S&P500 fell almost 2% after Netflix posted disappointing quarterly earnings. The company’s share fell over 20% after Q4 earnings showed a slowdown in subscriber growth.
In the commodities markets, oil bulls took a tea break after dominating throughout the week. Oil may edge lower in the week ahead until a new higher low is created. This could provide a strong foundation to springboard bulls closer to the $100 level.
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