Markets Today – Ukraine, Yield Curve, Putin Blinks, SPR Release, OPEC+, Oil, Gold, Bitcoin
Equities Drift Lower
By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
Equity markets are a little lower on Thursday, as the broad consolidation continues against the backdrop of gradual progress on Ukraine, fluctuating energy prices and inverting yield curves.
There’s plenty out there at the moment to make us nervous but at the same time, glimmers of hope after a nightmare start to the year. Talks between Ukraine and Russia are moving at a snail’s pace and it’s worth taking positive steps with a pinch of salt, but the noises coming from Turkey are as promising as we’ve seen.
Yield curve talk is prominent once again as investors fret about the flashing recession warnings. The most widely watched 2-10 spread remains positive but is basically treading water at this point. It may not take much to tip it over the edge at which point, what will investors do?
I’m not sure they’ll be hugely deterred as lower growth is already priced in as central banks rush to get inflation under control and commodity prices spike. Ultimately it comes down to what kind of recession bond markets are potentially pricing in, what impact massive central bank balance sheets have on that and what the imminent shrinking of them will do.
Which brings us nicely to the commodity markets, where all of the action seems to be at the moment. And it would appear it is the Kremlin that blinked first after threatening to cut its “hostile” customers off if they refused to pay for gas in roubles, regardless of what the contracts stipulated.
After a week of consideration, it seems there’s been a certain amount of backtracking and/or modification to the demands which will allow Europe to purchase its gas in euros as it did before. That may change when contracts come up for renewal but for now, it removes any imminent threat and shows the G7 was correct to stand strong knowing the terms were in their favour.
Oil slides as IEA steps in amid OPEC+ inaction
Oil prices are falling heavily on the back of reports the US is poised to announce a substantial draw on the SPR. The withdrawal dwarfs previous moves by the administration, equating to one million barrels per day and 180 million overall, around a third of total reserves. If coordinated alongside other countries, it could be much larger again.
At a time of extreme tightness in the oil market, when Russian exports are being disrupted as a result of Western sanctions, the move is very welcome. And the timing is, I’m sure, no coincidence either coming in the months leading up to the midterms later this year as Biden seeks to protect his slim majorities in Congress. It may be too late for that though.
The move is arguably necessary as well, given the reluctance of the apparently apolitical OPEC+ to free up further supply to ease pressures in the market. The group is widely expected to stick to plans to only increase by 400,000 barrels per day in May, before no doubt missing those targets by a wide margin, leaving certain members perfectly able and entirely unwilling to fill the shortfall. And an IEA-led reserve release may only solidify their position, shortly after OPEC+ ditched the organisation as a data source in what I’m sure is another non-political move.
Gold consolidation continues
Gold prices are slipping a little but continue to trade around the middle of the range they’ve remained within for the last couple of weeks. The yellow metal has found strong support around $1,900, with $1,960 capping any upside late last week and early this. A relatively tight range by recent standards at a time of immense uncertainty, high inflation and very hawkish central banks. I can’t imagine support for gold is evaporating any time soon although the upside may be limited for now.
Bitcoin slightly pares gains ahead of resistance
Bitcoin is continuing to pare gains on Thursday but has only given up a tiny amount of Monday’s surge in the sessions since. It seems there’s plenty of belief in the breakout and while we haven’t seen it build on that in any way, the lack of a significant pullback could be a bullish signal as it faces further resistance around $50,000 and $52,000.
Institutional Interest in Bitcoin Increased Amid Global Banking Crisis; Says Bittrex CEO
The CEO of Bittrex Global, Oliver Linch recently disclosed that institutional interest in Bitcoin has arrived. Linch added that he is anticipating more adoption, stating that leading financial institutions like Goldman Sachs will soon take on a larger role in crypto.
In an interview with Scott Melker, the head of the crypto exchange clarified that institutional adoption will not hurt cryptocurrency but rather aid the pace of innovation within the industry.
While acknowledging that there may be some painful moments along the way especially as it relates to regulation, Linch however anticipates that many partnerships will be formed between traditional financial institutions and those in the crypto sector which will be good for the crypto industry.
Speaking further, Linch also disclosed that during the bear market, many of the financial giants moved to establish crypto divisions within their companies, positioning themselves for the growth of the industry.
“Historically, those big players have been the biggest drivers of innovation. Are they a bit slow to adopt at the moment? Yeah, sure. But actually, the big change will happen when they stop fighting it and we stop fighting them.
“And we start talking about partnering and working together. Show them a way that it can be done and it can make them money and I guarantee you they won’t stand in the way of that. They’ll be pedal to the metal to exploit that opportunity.” Linch said.
Investors King earlier reported that bitcoin is up by 50% this year and it has outperformed major stock indexes and commodities despite the collapse of major crypto-related banks.
A report made by Goldman Sachs shows bitcoin as the best-performing investment asset in the world since the beginning of 2023, outperforming gold, the S&P 500 and the Nasdaq 100.
Bitcoin has so far enjoyed a remarkable year. From a low of $16,000, the flagship cryptocurrency is currently trading at $28,154. Data from Binance platform shows.
Bitcoin Surge to 9-Month High Amid Banking Turmoil
Bitcoin has surged to a 9-month high amid the banking turmoil in the United States. The flagship cryptocurrency is up by 50% since the beginning of 2023, trading at $27,779 at the time of writing this report.
Investors King earlier reported that the crypto mobile applications also increased by 15 per cent due to the uncertainty surrounding the US banking sector following the collapse of three big banks in the United States. It would be recalled that Silvergate, Signature and Silicon Valley Banks were shut down last week due to issues related to liquidity.
Investors and crypto experts have extolled the resilience of Bitcoin amid the banking crisis last week. They noted that bitcoin is trading at its lowest correlation to stock in months. Thereby making the most capitalised cryptocurrency a valuable alternative asset.
For instance, the Head of Ark Investment, Cathie Wood said “Indeed, during the last week, crypt assets behaved like safe havens: along with gold”.
Meanwhile, Bitcoin continued to hold firm during the early trading hours on Tuesday (today) while other crypto assets were trading lower. Traders across the globe are looking at the US Federal Reserve’s interest rate hike as its two-day FOMC meeting begins today.
Similarly, there has been an additional confidence boost in the global banking sector following Sunday’s announcement that Swiss banking giant UBS agreed to buy its crisis-hit rival Credit Suisse in an emergency deal worth over $3 billion.
Several largest central banks, including the Federal Reserve, the Bank of England, and the European Central Bank, also came together on Sunday to announce “coordinated action” to enhance liquidity in their standing U.S. dollar swap arrangements.
Interestingly, experts have predicted that bitcoin would benefit from central bank efforts to bolster liquidity in the global financial system. Bitcoin rose to a record of $69,000 in November 2021 after central banks and governments launched unprecedented monetary and fiscal stimulus measures.
Bitcoin Jumps Above $24,000 in Minutes Following Joe Biden’s Speech
Following Joe Biden’s speech, the world’s most capitalised cryptocurrency, Bitcoin jumped above the $24,000 mark in minutes.
In a widely televised speech, the U.S. president assured that the American banking system is “safe.”
Immediately after the news, Bitcoin surged by 6%, adding to the gain it has already recorded. Investors King earlier reported that digital assets across the cryptocurrency market are trading in green following Binance’s announcement that it plans to convert $1 billion to BTC, BNB and Ethereum.
After briefly touching $24,500, the flagship cryptocurrency exchanged hands at $24,170 as of the time of writing this report. Additionally, many of the alternate coins including Ether (ETH), Binance Coin (BNB), and Cardano (ADA), also responded positively to the announcement.
It would be recalled that the recent collapse of Silicon Valley Bank (SVB) and Signature Bank (SB) has caused severe panic, with some predicting a further decline in the banking sector.
In the highly anticipated speech, the President of the United States, Joe Biden, stated that Americans should have confidence in the local banking system, describing it as “safe”. He also assured that customer deposits remain available.
The United States President however noted that taxpayer funds won’t be used to bail out Silicon Valley Bank and Signature bank. He clarified that the money would come from the fees that banks pay into the Deposit Insurance Fund.
“Every American should feel confident that their deposits will be there, if and when they need them,” Biden said.
Meanwhile, the upward rally which has seen most of the cryptocurrencies recording double-digit gains has renewed interest in the once-abandoned digital currencies.
Similarly, the total cryptocurrency market capitalization has climbed back to $1.09 trillion, gaining 12% in the last 24 hours.
Experts have posited that once bitcoin breaks the $25,000 a coin resistance level, the digital currency will set a new mid-term record year.
However, a senior analyst at Investors King Ltd, Samed Olukoya described the recent surge in cryptocurrencies value as artificial, largely instigated by $1 billion expected to be injected into the space by Binance. To sustain the bullish run, institutional investors need to start investing in the space again.
“$1 billion additional liquidity in a market with almost $1 trillion capitalisation won’t do much without sustenance.”
News3 weeks ago
Npower Pays November, December Stipends; Gives Update on Next Step
Cryptocurrency3 weeks ago
90 Million People Use Cryptocurrency in Nigeria – Report
Technology3 weeks ago
Africa Emerges as The Worst Performing Region in Internet Value
Fintech3 weeks ago
Nigerians Turn to Digital Banks as Traditional Banking Apps Face Challenges
Finance1 week ago
Npower Release Update on Failed Payment, Send Validation Link to Affected Beneficiaries
Government4 weeks ago
Peter Obi of Labour Party Defeats Tinubu of APC in Lagos Presidential Election
Government4 weeks ago
Bola Tinubu Emerges Winner of Nigeria’s 2023 Presidential Election
Billionaire Watch3 weeks ago
Aliko Dangote, Johann Rupert Sit Atop Africa’s Forbes Richest Persons List in 2023