DAILY MARKET NEWS - 10-05-2023

Ariff Azraei

China is currently experiencing a new surge of COVID-19 infections, especially among individuals who have returned from public holiday travels, including traders and bankers. While some sources have reported that colleagues have tested positive for the virus, the impact on trading volumes is not expected to be as severe as during the previous outbreak. According to China's health authority, there has been an increase in the number of cases, but the number of severe cases in hospitals has not significantly risen, and the chances of regional large-scale outbreaks are low. Although another outbreak would be detrimental, the government's response is more significant to the economy, especially as many countries have relaxed their countermeasures after two years of battling the invisible enemy.
The US stock indexes closed lower as investors grew more cautious, awaiting clues on whether inflation is continuing to ease and updates on the country's debt ceiling from a meeting between US political leaders. The market's caution was also fuelled by disappointing forecasts from companies such as PayPal and Skyworks.
Despite a stronger dollar and bearish bond yields, gold prices rose for a second consecutive day as investors awaited US inflation data. The IMF warns Zimbabwe against launching a gold-backed digital currency, a move that has been proposed globally as a means of returning to the gold standard.
Oil prices fell in early trading on Wednesday following a surprise increase in U.S. crude stocks reported by the API. The increase in crude inventories of around 3.6 million barrels defied expectations of a 900,000-barrel drawdown. Wildfires in Alberta, Canada, eased on Tuesday, but oil and gas producers had to shut in at least 319,000 barrels of oil equivalent per day due to the fires.
The US dollar weakened on Wednesday as lawmakers failed to resolve the debt ceiling crisis. Investors are also preoccupied with US inflation data, with economists polled by Reuters expecting a 5.5% year-on-year increase in core consumer prices for April. Money markets are pricing in a 78.2% chance that the Fed will keep rates on hold at its next meeting in June and expect rate cuts to begin in July through the end of the year.

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