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Daily Market Update & Analysis by zForex

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18 MAY 2023


"Global Markets Soar as Asian Stocks Rally and European Markets Await Progress in Debt Ceiling Talks"

Asian stocks surged, marking their largest gain since March, as several key benchmarks in Australia, Hong Kong, and South Korea made significant advances. Japan's Topix index also climbed approximately 1%, reaching a fresh 33-year high, buoyed by rising exports and a weakening yen, which contributed to the overall positive market sentiment.

In Europe, markets are poised for a higher open on Thursday, driven by progress in U.S. debt ceiling talks. The DAX futures contract in Germany traded 0.9% higher, CAC 40 futures in France rose by 0.75%, and the FTSE 100 futures increased by 0.6%. European Central Bank Vice President Luis de Guindos commented that while the ECB has completed most of its tightening measures, there is still some way to go. The euro remained relatively stable. With limited economic data in Europe today, the focus will shift to a range of U.S. indicators, including the Philly Fed survey, jobless claims, and existing home sales.

The European Central Bank's recent interest rate hike as part of its ongoing efforts to combat inflation has attracted investor attention, with market participants seeking indications of future actions. ECB chief Christine Lagarde's comments will be closely watched, as she stated last week that inflation has remained elevated for an extended period, and the fight against inflation is not over until the 2% target is confidently within reach in the medium term.

Regarding the U.S. debt ceiling negotiations, House Speaker Kevin McCarthy expressed optimism about the progress, highlighting a "better process" for further talks and the potential for reaching a deal by the end of the week. U.S. President Joe Biden has cut short his trip to Asia to focus on the negotiations, according to the White House. Analysts noted that both parties have agreed to form new, smaller teams for ongoing discussions, signaling an advanced stage of negotiations.


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24 MAY 2023


"Global Markets Tumble as Geopolitical Concerns and Debt Ceiling Impasse Weigh on Investor Sentiment"

The MSCI Asia Pacific Index is on track to close at its lowest level in a week, following losses in the S&P 500 and Nasdaq 100 on Tuesday. Concerns over geopolitics and economic growth are weighing on mainland China shares, which are close to erasing their gains for the year.

In a surprise move, the Reserve Bank of New Zealand raised interest rates by a quarter-percentage point but indicated that no further tightening would be necessary to control inflation. The Official Cash Rate was raised to 5.5% from 5.25%, and the central bank's forecasts suggest that the rate has peaked and cuts may begin in the third quarter of 2024.

European equity markets are expected to open significantly lower on Wednesday, extending the losses from the previous session. Uncertainty surrounding the debt ceiling negotiations in Washington is dampening investor sentiment. The upcoming Germany Ifo survey of current business conditions will provide further insights into the economy, following positive PMI data indicating growth in German business activity driven by the services sector.ECB President Christine Lagarde made opening remarks at a celebration marking the central bank's 25th anniversary. She has emphasized the need to combat inflation, a sentiment supported by the Bundesbank president and the head of Deutsche Bank.

In the UK, consumer price inflation dropped to 8.7% year-on-year in April 2023, the lowest since March 2022, primarily due to a slowdown in electricity and gas prices. However, the inflation rate exceeded market expectations and remained significantly above the Bank of England's target of 2.0%.

In the United States, investors will be closely analyzing the minutes of this month's meeting to gauge the level of support for the decision to soften guidance on future interest rate hikes, which will provide insights into the likelihood of a hike in June.

The ongoing impasse over the debt ceiling continues to cast a shadow over the markets. The risk of a disastrous default remains until a deal is reached, with the U.S. government warning that it may be unable to meet its financial obligations by June 1.


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