April 27, 2023: Market Wrap Up

Oil rebounds after declining due to concerns over recession. 

Oil prices rose on Thursday, offsetting losses suffered due to fears of a recession in the United States and an increase in Russian oil exports, reducing the impact of OPEC production cuts.

Brent crude traded at $78.04 a barrel, up 35 cents or 0.45%. West Texas Intermediate rose 21 cents or 0.28% to $74.51 a barrel.

This increase came after oil prices fell about 4% on Wednesday, continuing to suffer sharp losses from the previous session, as growing fears of a recession in the United States, the world’s largest economy, overshadowed a report showing a larger-than-expected drop in US crude inventories.

US Energy Information Administration data showed a drop in crude inventories in the United States of 5.1 million barrels last week to 460.9 million barrels, exceeding the average analyst expectations in a Reuters survey for a decline of 1.5 million barrels.

OPEC’s share of Indian oil imports fell fastest in 22 years in 2022-2023 to the lowest level as Russia’s cheaper oil imports increased. Meanwhile, China is also intensifying its purchases of Russian Urals crude.

Sources said oil loading from western Russian ports in April would be the highest since 2019, exceeding 2.4 million barrels daily, despite Moscow’s commitment to production cuts. Moscow has also increased fuel supplies to Turkey, Asia, Africa, the Middle East, and Latin America.

Fears of the United States bankruptcy are driving debt default swaps to their highest level since 2011.

Global and local concerns over the escalating crises of banks and the debt ceiling have combined to raise the cost of insuring US sovereign debt to its highest level in 12 years since 2011.

Data from S&P Global Intelligence SPGI revealed that the spread of US debt default swaps for five years widened to 62 basis points on Thursday, up from 59 basis points on Wednesday. This comes alongside renewed fears of the US banking crisis, as shares in First Bank of America fell by over 40% yesterday after a weak earnings report showing a sharp decline in deposits.

On Tuesday, US Treasury Secretary Janet Yellen warned that Congress’s failure to raise the government’s debt ceiling – and the resulting default – would lead to an “economic catastrophe” that could raise interest rates for years to come.

The US economy is waiting for the release of first-quarter gross domestic product data today, with expectations of a growth slowdown from 2.6% in the previous reading to 2.0% in this reading.

Wells Fargo economists reveal upcoming moves for the US dollar index. 

According to economists from Wells Fargo, the US dollar index is likely to trade around current levels during the second quarter of this year, indicating that the dollar will witness mixed and multiple currents, which may lead to the dollar’s stability until the end the second quarter.

In addition, Wells Fargo analysts predict a decline in the US dollar index during the second half of 2023, as the US Federal Reserve may begin to lower interest rates more forcefully than its counterpart central banks.

This could impose long-term downward pressures on wide-ranging US dollar index trading during the second half of 2023 and until 2024. The US dollar index DXY fell by about 0.70% in today’s trading and recorded around 101.15 points.

Major economic data that are expected to be released today:

Traders will closely monitor the US quarterly Gross Domestic Product (GDP) and weekly jobless claims, which will be released at 12:30 pm GMT, after Wednesday’s data showed that new orders for key manufactured goods in the United States fell more than expected in March, while shipments declined, indicating that weak equipment spending led to a slowdown in economic growth in the first quarter of the year.

Markets now:

  • The US dollar index fell by 0.338% in today’s trading to reach $101.207 at the end of the US session.
  • Meanwhile, the yields on ten-year Treasury bonds rose by 1.26% to 3.441%, and the yields on two-year Treasury bonds increased by 0.83% to 3.9283%.
  • Gold spot contracts fell to $1988.7 per ounce, down 0.42%, while gold futures contracts fell by 0.29% to $1998.65 per ounce. Silver futures contracts rose by 0.23% to $25.148 per ounce.
  • Oil fell sharply in today’s trading, losing 3.56% for Texas crude and trading at $74.33, while Brent crude fell to $77.72, down 3.57%, amid rising global recession concerns.
  • Also, Bitcoin lost all the gains it had made in morning trading. After rising by 9% and hitting the $30,000 level, Bitcoin returned to trading at $27,736.0, down 1.05%.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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