Finance Inflation, NZ rate hike among top five things that happened in markets this week

Inflation, NZ rate hike among top five things that happened in markets this week

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US stockmarkets stabilised after a weaker-than-expected core US inflation print saw traders pare back expectations of a more aggressive Federal Reserve rate hiking cycle.

After an early wobble, the ASX200 found support from its usual allies, the energy and materials sectors, to reset sights on the all-time August 7632 high.

Here is a review of the top five things that happened in markets this week:

1. Bond yields ease on possible peak inflation

After an unrelenting march higher, US bond yields fell as a lower-than-expected core US inflation print for March raised hopes that peak inflation may be close.

Lower bond yields, if sustained, will provide some respite for both overseas and local tech stocks.

2. Kiwi collapses after the RBNZ delivers a 50 bp hike

The RBNZ raised its Overnight Cash Rate (OCR) by 50bp to 1.50 per cent, which the market was pre-positioned for.

However, the realisation that the RBNZ was frontloading rate hikes, due to future uncertainties saw the NZDUSD reverse and plunge almost 150 pts from .6902 to .6755.

3. Bank of Canada raises rates by 50 bp

The Bank of Canada (BoC) became the second G10 central bank to deliver a 50bp hike this week.

The accompanying statement indicated concern about the increasing risk that expectations of elevated inflation could become entrenched.

The 50bp hike likely sets the tone for further hikes to take monetary policy into restrictive territory.

4. Crude oil rebounds

Crude oil rebounded over 10 per cent from below $93.00 to above $104.00 p/b after Russian President Vladimir Putin said peace talks were at a “dead end”.

The rally was also supported by news that Shanghai’s lockdown may ease even with new COVID-19 cases at record levels and another month of missed production quotas by OPEC.

5. Natural gas surges 12.5 per cent this week

Natural gas surged more than 12.5 per cent this week and is up over 60 per cent from its lows a month ago on the Ukraine war and supply concerns.

The surge in natural gas prices has implications for farming and food supplies which use nitrogen fertilisers produced from natural gas to amplify crop production.

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