Asian stocks fall to 2-year low and gold rises despite US dollar rally

Global stocks stalled, oil fell and the euro approached safe-haven parity with the dollar on Tuesday
as the prospect of further tightening by central banks
renewed coronavirus outbreaks in China and energy shortages in Europe sparked alarm among investors.

Evest follows market developments in the following report.

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Asian stocks declined on Tuesday morning

The dollar rises and the euro swinges

Gold falls on the rise of the dollar

Brent price rises above $100 per barrel

MSCI’s broadest index of Asia-Pacific stocks outside Japan fell by 1.3 percent to a two-year low
while Japan’s Nikkei fell by 2 percent.

Futures also pointed to a week’s opening in the United States and Europe,
with the S&P 500 e-minis in the United States falling by 0.6 percent
Nasdaq futures falling by 0.7 percent, Euro Stoxx 50 futures across the region falling by 0.8 percent
and FTSE futures falling by 0.44 percent.

This week’s focus will be on macro data including U.S. consumer inflation on Wednesday
and comments from Fed officials as investors look for evidence of the outcome
of the Fed’s next policy meeting before officials a pre-meeting blackout period.

A high inflation reading could add pressure on the Fed to increase its already strong pace of rate increases.

The fact that a growing number of Chinese cities
including the Shanghai mall, are adopting new COVID-19 restrictions starting this week to curb
new infections after finding the highly transmissible Omicron variant, is also among the issues at the top of the list of investors’ concerns.

Early on, Hong Kong’s benchmark Hang Seng index fell by 1.21 percent to its lowest since June 17.

Investors are concerned that the lockdown could be extended due to the war in Ukraine
further restricting European gas supplies and pushing the euro zone’s struggling economy into recession.

The yield on the benchmark 10-year Treasury note was 2.9595 percent,
after falling below 3 percent overnight as investors bought safe Treasury bonds under Wall Street’s sell-off.

Concern about growth was also weighing on oil, despite concern about supply scarcity.

Brent crude futures fell by $1.35, a decline of 1.3 percent, to $105.75 per barrel
while US West Texas Intermediate (WTI) crude was $102.64 per barrel, marking a decline of $1.45, or 1.4 percent.

The dollar rises and the euro swinges

The US dollar reached a new peak in two decades against key peers on Tuesday
boosted by safety offers and expectations of the Federal Reserve raising interest rates
while the euro was suspended near a 20-year low near the dollar.

The dollar index, a measure against a group of six currencies, rose by 0.25 percent at 108.43
and had earlier climbed to 108.47 points, the highest since October 2002.

The euro also fell to $1.0005 against the US dollar, moving closer to parity for the first time in 20 years
as investors worry that the energy crisis will push the region into recession.

Experts see the dollar as the international reserve currency, so when there is a risk of recession or a rise in volatility
the greenback is the currency people that people flock to because it is the safest.

Sterling similarly fell by 0.25 percent to $1.18645, having earlier fallen to a two-year low of $1.186.

The recent devaluation of the euro appears to have been driven largely
by a market reassessment of the possibility of a further downturn in growth in the eurozone,
which has been inflated by energy problems, a longer-than-expected war and doubts about the ECB’s anti-retail tool.

The weakness of the euro has been a big factor pushing the dollar index higher
and the greenback’s designation as a safe haven has also supported concerns about growth elsewhere as well
with China, in particular, applying stringent coronavirus non-spread policies to contain the new outbreak.

Arguably the biggest factor in the dollar’s rise is the view that the Fed will raise interest rates faster and more than its peers.

The Fed is expected to raise rates by 75 basis points for the second time in a row at its July 26-27 meeting.

Elsewhere, the dollar fell by 0.09 percent to 137.28 Japanese yen, after Monday’s jump to a 24-year high of 137.75.

The Australian dollar fell by 0.22 percent to $0.6728, earlier agreeing to a two-year low of $0.6716
on Monday in the light of falling commodity prices and China’s new COVID restrictions.

Gold falls on the rise of the dollar

Gold rose on Tuesday morning in Asia, but moves were small after the US dollar continued to a 20-year high.

and Gold futures rose 0.04 percent to $1732.45 by this morning,
while gold prices fell to their lowest level since September 30 at $1730.42 per ounce during the previous session.

The president of that the Atlanta Fed said the US economy could handle high-interest rates
as he reiterated his support for raising the rate again this month.

In other precious metals, silver fell by 0.67 percent
platinum declined by 1.16 percent, and palladium by 1.56 percent.

Asian stocks fall to 2-year low

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