The most important transactions in the markets currently target the inflation.
The stock markets retreat this Wednesday (30) and the price of Petroleum rises in the face of skepticism regarding the promise of Russia to reduce attacks on Ukraine and concerns about rising raw material prices and interruptions in the supply of commodities.
The move reverses some of yesterday’s gains as markets advanced and the S&P 500 closed at its highest since mid-January. Commodity prices are expected to fall with the end of the war, easing pressure on central banks and energy-importing countries.
All this shows that investment decisions consider inflation and not the dividend brought by peace, according to strategists.
“Any sign of an end to the conflict would lower commodity prices and reduce inflation,” said George Boubouras, head of research at hedge fund K2 Asset Management in Melbourne. “That’s why people are looking at the yield curve and all of this could point to early cuts in key interest rates as it is recognized that there are risks of inflation, but that may now be further down the road.”
While they are still wary of Russia’s offer to pull back on military operations, investors are reversing some of their biggest bets on rising commodity prices and returning to assets that were previously dumped — including European equities, emerging market securities and even the yen.
The Japanese currency, which has fallen to its lowest level since 2015 this month, is an example of how inflation-based plays are outperforming traditional risk-based transactions. The yen appreciated 1.3% against the dollar this Wednesday with the understanding that the fall in energy prices will help the country’s trade balance – without considering the characteristic of the Japanese currency as a protective asset.
“The drop in oil prices amid negotiations between Russia and Ukraine could ease concerns about Japan’s trade deficit due to rising imported energy,” said Ken Cheung, currency strategist at Mizuho Bank in Hong Kong. The yen was also poised for a rally after the recent period of weakness, he said.
Source: Moneytimes
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