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Stocks Maintaining Post-Fed Rally

By Anna Peel. Originally published at ValueWalk.

Stocks maintaining post-Fed rally, Oil back above $100, Gold rallies, Bitcoin struggles – OANDA

US stocks are still holding onto their post-Fed gains as investors await developments with Russia/Ukraine negotiations. There is too much short-term geopolitical and economic growth risk that the rally in stocks appears like it will be capped soon. Wall Street is eagerly awaiting to see what happens with President Biden’s call with President Xi. If the US can have China refrain from providing support to the Russians, investors may grow more optimistic that an end to this war could happen much sooner.

Q4 2021 hedge fund letters, conferences and more

Equities extended gains after reports that JPMorgan processed Russia’s $117 million bond payment, which means the Russian’s have appeared to avoid its first default on foreign debt since the 1917 Bolshevik Revolution.  Russia said they made the payment on Monday, but never provided any details on the transfer. Rating agencies are closely watching these payments because if sanctions prevent Russia from sending dollars, the use of rubles would be considered a default.

US Data

A wrath of positive US economic data vindicated Fed Chair Powell’s optimistic view of the economy.  Jobless claims continue to improve as the labor market remains very strong and the impact of the omicron wave has disappeared.  Initial jobless claims declined to 214,000, much lower than the 220,00 estimate, and better than the upwardly revised 229,000 prior reading.  The housing market continues to remain strong.  Housing starts rose more than expected and building permits softened after a rather strong prior month.  The standout economic report was the Philly Fed that showed a robust rebound in March, which was a pleasant surprise considering the weak Empire State survey.  Industrial production rose as expected at 0.5% from a month ago as auto production declined by 3.5%.  Manufacturing activity in February was better than expected and that is impressive given continued shortages with semiconductor chips.

Oil

Crude prices have come down enough and seem poised to stabilize above the $100 a barrel level until energy traders have clarity over geopolitical developments in Ukraine and with Iran nuclear deal talks.  Not enough crude demand destruction has happened to warrant prices falling below the $90 level and with inventories continuing to decline, this oil market will likely remain tight for quite some time.

WTI crude seems poised to continue to edge higher if no major progress happens with Ukraine-Russia talks.  The Saudi Crown Prince noted the kingdom is keen on maintaining the oil market balanced and stable.

Oil prices edged higher after Secretary of State Blinken said he doesn’t see signs that Putin is prepared to stop and that the US is concerned China is considering helping Russia.  This war seems like it won’t be ending anytime soon and that likely means oil prices could have another strong rally here.

Gold

Gold prices rose as investors digest the Fed’s decision and try to figure out how the war in Ukraine will impact inflation and growth. It seems risks of much more aggressive tightening by the Fed is on the table, but traders need to remember that real rates are still deeply in negative territory. Treasury curve flattening is screaming growth concerns and that should help drive some safe-haven flows towards gold.

Gold should continue to grind higher here but could find resistance around the $1980 level.

Bitcoin

Bitcoin is struggling to follow the move higher in stocks.  One reason why Bitcoin is struggling is that it seems that initial stories of Russians rushing to the crypto markets to evade sanctions and minimize exposure to roubles was overdone.  Co-founder of Chainanalysis Levin said, “We have not seen evidence of Russia or Putin systematically using cryptocurrencies to evade sanctions.”

Regardless, Bitcoin’s long-term outlook is still upbeat and should be supported if risk appetite is not subject to any de-risking movements on Wall Street.

Article By Edward Moya, OANDA

Updated on

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