Daily Brief, January 17, 2023: BoE Made £3.8 Billions Profit from Bond Purchasing and Selling.

Bank of England Governor: The Risk Premium on British Assets has Almost Disappeared

BoE Governor Andrew Bailey said the risk premium on UK assets since September has largely disappeared, but confidence remains fragile. Investors had abandoned British assets, including government bonds and currency. The discard started after the previous government, led by “Liz Truss,” proposed in her fiscal plan to include tax cuts; This has forced the central bank to buy bonds to calm the markets.

It will take some time to convince people that we are back to normal. International partners will understand that we are back to normal,” Bailey told the Parliament’s Treasury Committee. Bailey indicated that the central bank had sold bonds worth more than 19 billion pounds (23.2 billion dollars) which it had bought within the emergency program to support the stability of the markets.

BoE Governor revealed that the bank made a profit of about 3.8 billion pounds from bond purchases in the emergency program before ending the sales on the twelfth of January.

Japanese Stocks Rise in Anticipation of BoJ Meeting’s Decisions

Japanese stocks rose in the early trading hours on Tuesday, reimbursing some of the losses recorded in the previous two sessions. The Nikkei index closed at the highest level of 26000 points. This rise comes despite investors’ caution with the start of the Bank of Japan meeting to discuss monetary policy today, which will last for two days.

The Bank of Japan announced that Governor Haruhiko Kuroda would travel to Davos to attend a panel discussion at the annual meeting of the World Economic Forum on Friday, explaining that Kuroda will leave Japan on Wednesday after the conclusion of the Bank of Japan meeting.

The Nikkei index closed the session 1.23% higher, at 26138 points. The US currency rose against its Japanese counterpart by 0.29% to 128.95. USD/JPY currently trades at 128.553 at the time of writing.

The Chinese Economy Grew by 3% in 2022, The Second-Worst Performance in 47 years.

China’s economic growth slumped in 2022 to one of its worst levels in almost half a century. The last quarter of the year had seen slow activity due to the brutal hit by onerous COVID-related restrictions and a slowdown in the real estate market, piling pressure on policymakers to unveil more stimulus this year. Quarterly, GDP stagnated, hitting zero in the fourth quarter, compared with growth of 3.9% in the July-September period. While for the total of 2022, GDP grew 3%, far behind the official target of “around 5.5%” and 8.4% growth in 2021. The Chinese economy is witnessing the worst performance since 1976, the last year of the decade-long Cultural Revolution that affected the economy.

Elon Musk Wins the Backing of a Gulf sovereign Fund Amid Twitter Turmoil.

The CEO of the Qatar Investment Authority, Mansour Al-Mahmoud, said that the sovereign wealth fund supports Elon Musk’s vision for Twitter, despite the turmoil accompanying the acquisition of the American billionaire. Al-Mahmoud added in a sideline interview at the World Economic Forum in Davos: “We are negotiating with the management and Elon regarding the plan he had set for the company. We believe in it, and we trust his leadership in changing the company’s direction.” The Qatar Investment Authority executive director added that their company did not ask the head of Twitter to reduce his tweets, saying that the funders would not get involved to that extent.

The Qatar Investment Authority helped finance the acquisition of Twitter, contributing $375 million to the $44 billion deal. The acquisition has led to an exodus of employees as Musk seeks to cut costs, which has raised concerns about whether Twitter can continue its operations and content regulation.

Gold Slightly Retreats but Consolidates Above $1900 an ounce.

Gold prices retreated slightly from their eight-month-high. Nevertheless, the precious metal was able to hold above $1900/ounce, supported by expectations of a lower interest rate hike in the upcoming Federal meeting. Spot gold price decreased to $1909.57/ounce at the time of writing, knowing that prices hit $1,929/ounce, the highest since late April, in yesterday’s trading session. US gold futures fell to $1912.60. 

For other precious metals, the spot silver price fell 0.1% to $24.053 an ounce after reaching its highest level in nearly two weeks. Platinum fell to $1,065.50, and palladium fell to $1,734.64.

Hopes of Chinese Demand Recovery Support Oil Prices

Oil prices fell on Monday, January 16. Still, they held near their highest levels since the beginning of the year amid optimism about increasing fuel demand in China.

Both benchmarks, Brent and Crude, rose more than 8% last week, the biggest weekly gain since October, after China’s crude imports rose 4% year-on-year in December, while a boom in Lunar New Year travel boosted fuel demand expectations.

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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