Swissquote Bank: No recession, but slow and low growth…


Swissquote Bank: No recession, but slow and low growth…

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By Ipek Ozkardeskaya, Senior Analyst, Swissquote Bank

The OECD said the global economy will avoid a recession this year, and next year, and that unemployment rates won’t skyrocket. That was the good news.

But growth will be low and slow, and inflation will remain high, keeping central bank policies tight. That was the bad news 

The S&P500 gained 1.36% yesterday, while Nasdaq added almost 1.50%. Strong earnings from retailers improved sentiment before Thanksgiving.  

Energy stocks performed well on the back of a sustained recovery in crude oil. Exxon Mobil jumped almost 3%, as US crude consolidated near the $80pb in the wake of a dive after the WSJ reported that OPEC+ considered half a million-barrel increase in production, that Saudi rapidly denied.  

Plus, the European gas futures are headed higher on news that Gazprom now threatens to cut gas supplies to Europe next week via the last remaining pipeline… and the timing is excellent, as we just start to feel the cold of the winter. Higher nat gas futures are also a positive factor for oil.   

One piece of news that could soften the bull’s hand is the EU that could soften its plan regarding the Russian oil price cap. They propose a 45-day transition period, and a potentially higher price level than the $40-60 range markets are looking for. The Europeans will be discussing all that today. What the Europeans want is to keep the Russian oil in the market to avoid a price spike, but to prevent Russians from earning too much of their oil sales.  

Goodbye Shell! 

Shell rallied 5% on announcement that the company will be reviewing its investment in the UK to avoid paying windfall taxes to the British government. BP rallied 6.52%. 

The rally in energy stocks helped FTSE gain more than 1%, along with the less aggressive recession prediction from the OECD, compared to the Brits themselves.  

FTSE futures hint at a slightly positive start on Wednesday. 

RBNZ raises by 75bp 

The Reserve Bank of New Zealand (RBNZ) raised its rates by 75bp as expected today. In total, the RBNZ raised the rates by 400bp since October last year, but the kiwi didn’t benefit from higher RBNZ rates, as the US dollar has been, and is, the only driver of value in the FX markets right now.  

The US dollar softened yesterday allowing some majors to breathe. The EURUSD rebounded past 1.0320 in the middle of mixed comments about what the European Central Bank (ECB) should do at its next meeting.  

The expectation is tilted toward a 50bp hike in the December meeting, as the latest Reuters poll showed that more than 70% of the participants expect a 50bp hike next month, instead of a 75bp hike.  

Will that slow the euro’s recovery? It depends on the US dollar. If the dollar extends losses, the EURUSD will do fine. The thing is, the outlook for the US dollar remains positive on the back of a still hawkish Fed, which will fight inflation until the last drop of blood.  

In precious metals, gold slid yesterday despite a softer US dollar, and softer yields. The yellow metal eased to $1732 an ounce, and the hawkish Fed expectations should further pressure the price toward the $1720 target, to meet the 100-DMA. 

Elsewhere, the Chinese stocks are not looking good as Beijing and Shanghai put stricter rules to slow the Covid contagion, again! But Alibaba rebounded almost 4% in HK today, on news that Ant Group would pay a fine over a billion USD, which would end a regulatory overhaul, and help the company go on with its life, and secure the much-awaited financial company holding license.  

In cryptocurrencies, traders remain on the edge, on news that a ‘substantial amount’ of FTX assets have either been stolen or are missing. Bitcoin however resists. The price of a coin recovered above $16K yesterday, but risks remain tilted to the downside.