Volatile Oil Prices Swing Global Markets

Oil prices were quite volatile over the fortnight as various nations announced plans to release more supply of oil to tame elevated prices

The US frontline equity indices Nasdaq, S&P 500, and Dow Jones index were up by 3 per cent, 1.57 per cent and 0.33 per cent, respectively. Oil prices were volatile as US President Joe Biden announced the release of one million barrels of oil per day for the next 6 months from its strategic reserves in an effort to reduce the oil prices. The United States also announced a new set of sanctions against several Russian entities.

The 2-year and 10-year US Treasury yields inverted for the first time since 2019 sending a possible warning signal that a recession could be on the horizon. The bond market phenomenon means the rate of the 2-year note is now higher than the 10-year note yield. The 2-year to 10-year yield spread was last in the negative territory in 2019 before pandemic lockdowns sent the global economy into a steep recession in early 2020. According to data released by the Bureau of Labor Statistics, the U.S. economy added 431,000 jobs in March and the unemployment rate fell to 3.6 per cent. The current unemployment rate is within one tenth of a percentage point of February 2020, when the jobless rate had fallen to a historical low of 3.5 percent. A waning pandemic, inflation at record levels and higher prices for goods as well as services is driving workers back into the job market.

During the fortnight, FTSE index was up by 1.26 per cent as the UK’s Central Bank Financial Policy Committee decided to regulate the cryptocurrency market which has now a valuation of about USD 1.7 trillion.

"The 2-year to 10-year yield spread was last in the negative territory in 2019 before pandemic lockdowns sent the global economy into a steep recession in early 2020"

The committee will make recommendations to the UK Treasury on adapting the remit for supervising crypto assets, which do not lie in the scope of the Financial Conduct Authority. European countries are facing headline inflation of 7.5 per cent in March as compared to 5.9 per cent in February. Eurozone benchmark indices DAX and CAC 40 were also marginally up by 0.31 per cent and 1.08 per cent.

The Shanghai index was up by 0.65 per cent, while Nikkei also gained 1.88 per cent over the fortnight. The manufacturing sector of China saw slower growth in the first quarter, according to an independent survey by China Beige Book. It is a sign that China’s economy may not benefit as much from overseas demand as Covid control policies diverge. Also, Citi Bank has raised China’s GDP target closer to the official target of 5.5 per cent this week, as China reported growth in retail sales, fixed-asset investment and industrial production.