Weekly Digest: Fed Rate Hike, Cuts to China’s Growth Forecast


3 minutes read

May 4, 2022

Red China map and an arrow pointing down after Fitch lowered China’s GDP growth forecast for 2022 due to Covid-19 lockdowns

04/05/22: The Fed is set to fight inflation with the fastest rate hikes in decades, Fitch trims China’s 2022 growth forecast amid Covid-19 lockdowns, two Argentinian banks will allow crypto trading. And more.

Investment news

The gold price fell on Wednesday as demand for zero-yield bullion was stifled by higher US Treasury yields and a looming interest rate hike announcement by the Federal Reserve.

Here’s how the prices of gold, silver, platinum and palladium have changed over the past week:

a table showing how the prices of precious metals have changed over the past week

As investors braced for the Federal Reserve's biggest rate hike since 2000, global stocks rose on Tuesday and 10-year Treasury yields remained above 3%. (Reuters)

The STOXX 600, a pan-European equity benchmark, was up 0.8%, reversing Monday's losses, while MSCI's (Morgan Stanley Capital International) global stock index increased by 0.1%.

The S&P 500, meanwhile, is trading in correction territory, down about 13% from its record highs.

The Fed is expected to raise rates by 50 basis points at the end of a two-day meeting on Wednesday in a bid to rein in soaring inflation.

Read our SPOTLIGHT to see how interest rate hikes can affect the gold price.

U.S. Federal Reserve raises interest rates to fight runaway inflation as showed in a picture of gold coins and U.S. dollar banknotes with a percent sign

Oil prices fell about 1% on Tuesday as concerns about demand in China outweighed support from a possible European oil embargo on Russia due to its actions in Ukraine. (Reuters)

At $106.28 a barrel, Brent crude was down $1.30, or 1.2%.

"The positive driver has been the EU embargo and whether that will be announced. Your negative driver is Chinese COVID lockdowns. They're both very important thematics," said Commonwealth Bank commodities analyst Vivek Dhar.

Within a decade, 1 billion people will have used or tried crypto, up from about 200 million now, Coinbase Global Inc. Chief Executive Officer Brian Armstrong said. (Bloomberg)

“My guess is that in 10-20 years, we’ll see a substantial portion of GDP happening in the crypto economy,” Armstrong stressed.

His remarks come at a time when cryptocurrency markets are in turmoil. Bitcoin has been losing value since hitting an all-time high of nearly $69,000 in November. Since the start of the year, the world's largest cryptocurrency has lost about 17% of its value.

Read our SPOTLIGHT to see why cryptocurrencies' prices are so volatile.

Argentine banks allow trading in Bitcoin, Ethereum and other cryptocurrencies as showed in a picture of a piggybank in Argentine flag colors and a gold bitcoin coin

🇦🇷 Argentina’s embracing crypto: Argentina's largest and second-largest private banks, Banco Galicia and Brubank, will allow customers to buy crypto including Bitcoin, Ether and USDC starting next week. (Bloomberg)

Banco Galicia made the decision in response to high customer demand, with 60 percent of survey respondents requesting easy access to cryptocurrency through their banks.

Argentina is one of the top ten countries in the world with the highest adoption of cryptocurrencies.

Norway's $1.2 trillion sovereign wealth fund is bracing for a bumpy ride as the world faces the most significant geopolitical shifts in three decades, its CEO said. (Reuters)

"We probably face the greatest changes for 30 years," Nicolai Tangen said, adding the world's largest sovereign wealth fund expects "growing frictions between superpowers and a reversal of globalization".


Capital. com’s Chief Market Strategist David Jones shares his thoughts about the situation on the market. (Reuters)

Markets have been rocked by the Russia-Ukraine war, leading to volatile trading on multiple fronts, including energy, commodities and currency markets. Stagflation is also on the cards.

“Inflation shows no sign of abating, … and we’re definitely facing an economic backdrop that plenty of us, as adult investors, have never lived trough before,” Jones said.

Read our SPOTLIGHT to find out more about stagflation and its possible effects on the global economy and gold price.

What else is happening

The European Commission is expected to propose a sixth package of EU sanctions against Russia this week, including a possible embargo on buying Russian oil, in response to its February 24 invasion of Ukraine. In a major policy shift, Germany could back the immediate EU ban on Russian oil. (Reuters)

"We have managed to reach a situation where Germany is able to bear an oil embargo," German Economy Minister Robert Habeck said.

EU prepares a sixth package of sanctions against Russia due to its invasion of Ukraine, with Germany expected to support the ban on Russian oil

Because of the Covid-19 lockdowns, Fitch Ratings has lowered its forecast for China's gross domestic product growth in 2022. (Bloomberg)

According to a statement released by the agency on Tuesday, the agency trimmed its growth forecast to 4.3 percent from 4.8%.

And finally…

🦈 Fossils from some of the largest creatures ever to swim the oceans - whale-sized marine reptiles known as ichthyosaurs - have been discovered in an unexpected location: atop three Swiss Alps mountains rising to 2,740 meters above sea level. (Reuters)

scientists discover the remains whale-sized reptiles called ichthyosaurs atop three Swiss Alps mountains

Scientists described rib and vertebrae fossils from two ichthyosaurs, dating to around 250 million years ago, one about 69 feet (21 meters) long and the other about 49 feet (14 meters) long.


See you next week!


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