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Recovery Losing Momentum

It’s been a relatively slow start to trading in equity markets as we approach the end of the week, with stocks losing the momentum that’s driven the strong recovery in recent weeks.

The recovery has arguably been overdone considering the invasion of Ukraine is ongoing and commodity prices are at sky-high levels and still prone to surges. But the fact that Ukraine and Russia remain in negotiations seems to be enough to keep investors on board.

The threat of very high inflation and rapid rate hikes isn’t proving much of a deterrent either which is interesting after more than a decade of ultra-low rates in both cases. Again, this may change as we see more evidence of the economic consequences and as central banks both raise rates and reduce their balance sheets but for now, markets are holding up.
MOEX manipulated higher as trading resumes

Russian stocks restarted trading on Thursday and it’s safe to say this is no longer a normal functioning market. Trading ceased on stocks for almost a month after they plunged in response to Western sanctions against Russia for its illegal invasion of Ukraine.

Authorities are going to great lengths to manipulate the market and prevent another devastating plunge and their efforts are working, for now. The MOEX rallied more than 4% in shortened trade thanks to a combination of heavy government buying and bans on short-selling and foreign sales. There is nothing normal, functional, or sustainable about the Russian market right now, they’re simply buying time.

Oil stabilises as OPEC expresses concerns

Even oil prices are a little flat after spiking higher on Wednesday in response to apparent storm damage on the Caspian Pipeline Consortium (CPC) that will affect around a million barrels per day from Kazakhstan for up to a couple of months. Coming at a time when the market is already extremely tight, it could ensure prices remain higher and vulnerable to further increases.

OPEC has reportedly expressed its unease to the EU regarding a proposed ban on Russian oil. In much the same way that Western leaders have had their requests for additional oil production overlooked in recent months as prices have surged, I can’t help but think OPEC’s concerns will fall on deaf ears. I guess we’ll soon see just how strong the OPEC+ alliance is.

Gold higher amid commodity surge

Gold is creeping higher again, adding to yesterday’s gains which came in risk-averse trade. The yellow metal remains well supported against the backdrop of high inflation and commodity price surges, not to mention waves of risk-aversion in these highly uncertain times.

It ran into some resistance around $1,960 earlier in the session before pulling back to trade around $1,950. It’s given back a lot of the gains secured earlier this month as traders sought the shelter of a reliable safe haven and inflation hedge amid the Ukraine invasion and sky-rocketing commodity prices. But it’s seen firm support around $1,900 even as risk appetite has improved. Upside may be slow as a result of this but equally, I expect this support to remain firm in the absence of significant progress in ceasefire talks.

Bitcoin sights set on $45,500

Bitcoin has been quietly creeping higher in recent weeks and was relatively unaffected by yesterday’s bout of risk aversion. It held above $40,000 during the pullback earlier this week and is holding onto gains once more as it eyes the next big test around $45,500. It’s failed here repeatedly before but further improvements in risk appetite in the markets may see it over the line.

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