US stockmarkets plunged as stubbornly high inflation persisted in the US, sparking fears the Federal Reserve would unleash even more aggressive tightening measures.
Another tough week for the ASX200, falling over 3 per cent, as May lived up to its reputation as a volatile one for the local stockmarket.
Here is a review of the top five things that happened in markets this week:
1. High US inflation persists
Dashing hopes that inflation pressures have peaked, the inflation rate in the US slowed to 8.3 per cent in April from a 41-year high of 8.5 per cent in March, but less than market forecasts of 8.1 per cent.
The core inflation rate fell from 6.5 per cent to 6.2 per cent, still significantly above the Fed’s target of 2 per cent inflation.
Risks remain that persistently high inflation will feed into inflation expectations and force the Federal Reserve to unleash more aggressive tightening measures.
2. AUDUSD cracks the .7000c support level
China’s damaging COVID-19 lockdowns, high inflation and hawkish Fed speak saw the AUDUSD sustain a break below .7000c for the first time since July 2020.
Good news for Australia’s exporting companies.
Not so good for consumers looking to enjoy an overseas holiday.
3. Bitcoin battered but not beaten
Bitcoin dived 18 per cent this week, weighed on by falls on Wall Street, and after Terra USD lost its peg to the US dollar following large withdrawals.
Terra USD is backed by the issuer’s crypto coin, Luna and, managed by market participants via a complex algorithm, fell almost 100 per cent from $77.00 to below $0.50.
4. Gold melts for a fourth week in a row
Gold fell below $1850 and has lost ~ 8 per cent from its April 18, $1999 high.
The Fed’s more aggressive super tightening cycle has undermined the value of gold for two key reasons.
The first is an expectation that inflation will soon peak, courtesy of higher interest rates.
The second is that higher interest rates undermine demand for gold because gold yields nothing and costs money to store safely.
5. Q1 2022 US earnings season wraps up
Q1 US earnings season wrapped up this week with reports from big names including Disney, Roblox, Peloton, Coinbase and EV maker Rivian.
Disney’s earnings missed on both the top and bottom lines.
However, it added a chunky 7.9 million subscribers versus the 4.5 million expected, sending the stock price 5 per cent higher in after-hours trading.
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