The week was marked by synchronized actions by the world's leading central banks. They raised rates by 25 bp, continuing their crusade against inflation, which seems to be the only thing left to do. First, the US Federal Reserve did it, then the European Central Bank. Given that the Fed's actions were expected, everyone focused on their words, which generally pleased the market. But what upset the market was the actions of the Bank of Japan, which unexpectedly joined the rate hike. As a result, it led to a slight sell-off and pushed the US stock market away from local highs that were already approaching historic highs. This unnerved investors looking for an excuse to sell something amid record multiples of US stocks. Tesla's valuation makes everything clear. Elon Musk is dizzy from success (or other potent substances) while playing the king of Twitter, breaking what he has not yet managed to break.
As a result, the S&P 500 index opened on Friday at 4,537 points, only three points lower than last Friday's opening level. Good economic statistics, which continue to come from the United States, prevent the index from falling further. Where the statistics are worse is in Europe. Industrial production in Germany is particularly disappointing.
Suppose you thought that this was the result of sanctions or expensive gas. In that case, you may have just watched the videos of Russian propaganda, which, after winter masterpieces about the freezing British, switched to videos in German, doing cheap and angry Jojo Rabbit cosplay and promising Germans total "impoverishment" against the backdrop of support for Ukraine, flirting with taboo topics in Germany. Gas is now only $300 on the market. The German economy is suffering from the weakness of the Chinese economy, which has recently become a key customer of German industry. Support for Ukraine was not even close to the issue. This week, the markets have perked up a bit on the back of Chinese promises to stimulate growth. However, it still needs to be determined whether the Chinese will succeed.
Another result of the reversal of the central banks' decisions was the strengthening of the dollar against the euro. The exchange rate for the world's foremost currency pair is now $1.098 per euro. The weakening of the European currency has pleased German exporters, who are in a deep depression, a little bit. Oil continues to trade above $80 per barrel. Apparently, against the backdrop of real supply cuts by Russia and Saudi Arabia. But the price of grain and corn continues to creep up. And here, of course, Russia is also involved, as the rise in food prices in the world continues amid Moscow's active terrorist actions in the ports of Odesa. After these attacks on the global food supply, it is difficult to keep a good face when telling African leaders how much you love and respect them. After all, who better than these leaders to know what the rising cost of food, especially bread, means for their governments? What's terrible for Africans is good for Ukrainian farmers, who find the increasing price of grain and corn very helpful in maintaining at least some profitability amid more expensive logistics across the Danube and the western border compared to the usual exports from the seaport.
The mood in the Ukrainian Eurobond segment remains good. Sovereign securities rose by about one point along the yield curve. Only Kernel's Eurobonds, which for some reason are being hunted by Russian generals, are doing poorly. One of them recently owned shares in Kernel and was offended after the forced buyout. On the domestic market, the National Bank was the primary newsmaker, as was the case this week. It cut the key policy rate for the first time since the start of the full-scale invasion. The rate cut was expected, as the NBU had prepared the market with its verbal interventions, and the only question was how much the regulator would reduce the cost of money in the economy. As a result, they cut the rate from 25% to 22%, which is more radical than forecasters generally expected. This is clearly not the last cut this year. Moreover, the National Bank itself has revised its inflation forecast for 2023, lowering it to below 11%.
And the hryvnia started to move. It gives the impression that we have a real and mature market and that the exchange rate, even on the black market, depends on the NBU's decisions on the discount rate. Until Friday, the black market exchange rate was about 37.6 hryvnia to the dollar. And the hryvnia's movement was surprisingly synchronized, adding 10 kopecks a day starting Monday. What made the black market exchange rate wake up and move is not entirely clear. Currency speculators may have seen a chance to organize at least some life on the currency market amid the problems with the grain deal and decided to rock the market. People have to make money somehow. Or we saw some early manifestation of the seasonality characteristic of the Ukrainian currency market, which depends on harvest and sowing periods, just like members of the Trypillian culture. Usually, however, this seasonality started a little later, closer to September.
P. S. Every great story on the planet happened when someone decided not to give up, but kept going no matter what
Spryte Loriano