Russia shells Ukrainian civilians. The White House imposes export restrictions on China

The US Federal Reserve Vice Chair Lael Brainard hinted that the US Central Bank would continue its mission to reduce inflation despite the worsening growth outlook. The policymaker predicts that the recovery in the year’s second half will be limited. A 75 basis point hike in November and a peak rate of 4.604.70% is now the main target, but additional hawkish comments could spur additional panic amid a longer tightening cycle. The White House also added fuel to the fire after it unveiled new export restrictions on US companies selling semiconductor chips and other manufacturing equipment to China, which led to the fall of tech companies. As the stock market closed Monday, the Dow Jones Index (US30) decreased by 0.32%, and the S&P 500 Index (US500) fell by 0.75%. The Technology Index NASDAQ (US100) lost 1.04%.

Equity markets in Europe were mostly down on Monday. German DAX (DE30) declined by 0.01%, French CAC 40 (FR40) fell by 0.45%, Spanish IBEX 35 (ES35) was 0.31% lower, British FTSE 100 (UK100) closed yesterday with 0.45% loss.

British government bond prices fell on Monday, indicating that investors have yet to be persuaded by Finance Minister Kwasi Kwarteng’s desire to bolster confidence in the budget. Also, on Monday, the Bank of England expanded the scope of its emergency intervention. But strategists at JPMorgan said they believe longterm British yields will continue to rise, keeping the pound from falling.

The US dollar strengthened sharply in early trading on Monday after Russia launched a series of missile strikes on critical infrastructure in Ukraine and on ordinary residential areas, including the capital Kyiv. A total of 85 missiles and more than 20 kamikaze drones were fired at Ukraine. 43 missiles and 8 drones were shot down. Eight regions of Ukraine were temporarily left without power supply, 19 civilians were killed, and approximately 105 were injured, including children. Nothing strategic, nothing tactical, nothing meaningful, just onesided terrorism by the Russian Federation. Having suffered serious losses on the front, all Russia has to do is simply shoot at civilians to somehow compensate for its despair and agony.

After the massive missile attack on Ukraine, protests against the war and in support of Ukraine began in European capitals. Estonia is officially considering recognizing Russia as a sponsor of terrorism.

Oil prices fell by 2% yesterday as the dollar index continues to strengthen, and investors are concerned that COVID will reduce demand in China. A strong dollar reduces demand for oil, making it more expensive for buyers using other currencies. Analysts added that the consistent zero COVID19 policy in China ahead of the Communist Party Congress doesn’t help demand. But it is worth realizing that the fundamental backdrop points to rising oil prices, as OPEC+ last week decided to lower its production target by 2 million barrels per day. At the same time, investors should not forget that the EU sanctions on Russian oil and oil products will come into effect in December and February, respectively.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) lost 0.71% over the day, Hong Kong’s Hang Seng (HK50) fell by 2.95%, while Australia’s S&P/ASX 200 (AU200) dropped 1.40%.

Shares of chipmakers Anji Microelectronics Tech Co Ltd and Chengdu Xuguang Electronics Co Ltd fell about 20% after the White House unveiled export controls barring Chinese companies from certain semiconductor chips made with US equipment. Technology heavyweights Alibaba Group Holding Ltd, Baidu Inc, and Tencent Holdings Ltd lost 2% to 4%. The US actions threaten to worsen trade ties between the world’s two largest economies and could have deeper economic consequences if China retaliates.

Also in the spotlight, this week is the 20th Congress of the Chinese Communist Party, which is expected to determine government policy for the next five years.

S&P 500 (F) (US500) 3,612.39 −27.27 (−0.75%)

Dow Jones (US30) 29,202.88 −93.91 (−0.32%)

DAX (DE40) 12,272.94 −0.060 (−0.01%)

FTSE 100 (UK100) 6,959.31 −31.78 (−0.45%)

USD Index 112.75 +0.49 (+0.44%)

• Australia NAB Business Confidence (m/m) at 03:30 (GMT+3);
• UK Average Earnings Index (m/m) at 09:00 (GMT+3);
• UK Claimant Count Change (m/m) at 09:00 (GMT+3);
• UK Unemployment Rate (m/m) at 09:00 (GMT+3);
• US FOMC member Mester Speaks at 19:00 (GMT+3);
• Switzerland SNB Chairman Jordan Speaks at 19:45 (GMT+3);
• UK BoE Gov Bailey Speaks at 21:35 (GMT+3).

by JustMarkets, 2022.10.11