Israel's missile strike on the central Iranian city of Isfahan has heavily impacted global financial markets and bolstered the appeal of precious metals as safe-haven assets. This week, traders felt the hawkish stance of central bank officials, exacerbating the market's selling pressure. Concurrently, the strong US dollar is causing a sweeping storm across Asian currencies.
Tech Stocks 'Air Raid'
On Friday (19th), the Dow Jones increased by 0.56%, accumulating a rise of 0.01% for the week; NASDAQ fell by 2.05%, with a weekly decline of 5.52%, marking its worst weekly performance since November 2022; S&P 500 index dropped by 0.88%, declining for the sixth consecutive day, with a weekly fall of 3.05%.
The semiconductor sector led the declines, with Advanced Micro Devices (AMD) falling over 23%, Arm over 16%; Nvidia slumped by 10%, its market value falling below $2 trillion; AMD dropped over 5%, and Micron Technology by over 4%; other "Big 7" members, including Meta, fell over 4%; Amazon, Microsoft, Apple, parent company of Google Alphabet, Tesla fell over 1%, with Tesla's stock price hitting a new low since January 2023.
Taiwan Semiconductor Manufacturing Company (TSMC) Vice Chairman and President Wei Zhejia stated in an online investor briefing that they are reducing the growth forecast for the semiconductor industry in 2024, excluding storage, to 10%, and the foundry industry growth to between 15% and 17%, a forecast lower than previous expectations.
Big Bank Stocks Up
Bank of America surged over 3%, Wells Fargo and JPMorgan Chase & Co each rose over 2%; Citigroup increased by more than 1%.
Energy stocks generally rose, with Petrobras surging over 5%, US Energy (USEG) over 3%.
The US Environmental Protection Agency announced that this summer, it will temporarily expand the sale of high-ethanol blend gasoline to minimize potential supply disruptions during the ongoing Russia-Ukraine war and conflicts in the Middle East.
Billions Withdrawn from US Stocks!
According to data from EPFR Global cited by Bank of America, investors redeemed $21.1 billion from stock funds over the past two weeks as of Wednesday, marking the largest redemption since December 2022. During the same period, the bond market saw a capital inflow of $5.7 billion.
Fed's "Beige Book" Signals Inflation Risks
On Wednesday (17th), the Beige Book reported that the US economy has grown slightly since the end of February, with prices maintaining a moderate increase.
The Federal Reserve warned that ongoing inflation poses the greatest threat to financial stability, noting that hedge funds' leverage ratios have reached their highest levels since at least 2013.
Amid the release of the report, the US stock market experienced severe volatility, especially in tech stocks, drawing broad market attention.
The Fed Gets 'Hawkisher'
This week, traders sensed central bank officials' intentions to limit bets on upcoming easing policies, and their hawkish stance intensified the market's selling pressure.
Recent statements from Federal Reserve officials indicate no rush to cut rates in the short term. This stance was echoed by Fed Chair Jerome Powell, including "third in command" John Williams of the New York Fed and Raphael Bostic of the Atlanta Fed.
On Thursday (18th), when asked if it would be appropriate to keep interest rates stable throughout the year, Minneapolis Fed President Neel Kashkari responded, "It's possible."
In addition to ongoing inflation, it's important to emphasize that a continuously tight labor market strengthens the view of a robust economy, supporting the concept of a "soft landing" and suggesting that the anticipated timing for the first rate cut might be delayed.
According to the CME Group's FedWatch tool, the likelihood of the Fed initiating an easing cycle in June has significantly dropped to around 16%, while expectations for a "first cut" in September have risen to over 65%.
Amid fears of further tit-for-tat retaliations between Iran and Israel, which have heightened the appeal of precious metals as safe-haven assets, gold prices remained firm this week. Coupled with a weakening US dollar and declining US Treasury yields, these factors significantly influenced Friday's gold market behavior.
Despite Tehran indicating no immediate plans for retaliation, the #MiddleEastSituation remains a key driver of market sentiment.
Gold prices achieved their fifth consecutive weekly rise, the longest streak since January 2023. As of press time, the spot gold price was at $2,392.12 per ounce, having earlier reached a high of $2,417.92 during the week, with prices rising over 1% for the week.
The 10-year Treasury yield fell more than 2 basis points to 4.623%, reflecting growing investor caution.
Ole Hansen, head of commodity strategy at Saxo Bank, stated, "It's becoming increasingly apparent that gold has abandoned its normal response function."
Hansen noted that factors driving gold prices up 16% this year include the combined effects of the Russia-Ukraine war and related geopolitical risks in the Middle East; strong retail demand from China; central bank demand; major economies' debt-to-GDP ratios continually rising; and the possibility of accelerating inflation prospects.
Asian Currencies Face a 'Comprehensive Storm'
Whether it's major Asian economies' currencies like the Japanese yen, Indian rupee, and South Korean won, or smaller ASEAN currencies like the Indonesian rupiah, Vietnamese dong, and Philippine peso, all are experiencing a new round of selling pressure.
Facing the surging depreciation tide, central banks of various countries have urgently acted. On Wednesday (17th), Japanese and South Korean officials simultaneously intervened verbally in the foreign exchange market; the Indonesian central bank even took to the field directly, selling high-yield securities and buying Indonesian rupiah to suppress its currency's decline.
A report released by the International Monetary Fund (IMF) shows that if the US dollar exchange rate increases by 10%, emerging countries' real GDP will decline by 1.9% a year later, with the negative economic impact lasting for over two years.
Stimulated by Powell's "hawkish" remarks, the US dollar index reached a five-month high of 106.50 on April 16th.
On Friday (19th), the US dollar index fell by 0.07%, reporting at 106.07; EUR/USD fell by 0.08%, to 1.0650; GBP/USD fell by 0.03%, to 1.2439, slightly above the five-month low, following data showing stagnant UK retail sales in March; USD/JPY rose by 0.04%, to 154.50.
The yen, which has safe-haven properties, once strengthened significantly due to Israel's attack on Iran, causing the USD/JPY rate to drop to 153.59, but later the yen gave back all its gains. Currently, the yen's exchange rate remains near a 34-year low, and investors need to be cautious of potential intervention by the Japanese government.
The Chinese yuan's exchange rate is still hovering near a five-month low, with USD/CNY rising by 0.04%, to 7.2410.
In terms of global asset performance, WTI May crude oil futures rose by 0.49%, with a weekly cumulative decline of over 2.94%; Brent June crude oil futures rose by 0.2%, with a weekly cumulative decline of over 3.49%.
This week, LME 3-month copper futures rose by 4.53%; 3-month aluminum futures by 6.86%; 3-month zinc futures by 0.97%; 3-month nickel futures by 9.39%; tin futures by 5.03%.
Bitcoin Completes Its Fourth 'Halving'
The result of Friday's (19th) #BitcoinHalving is that the amount of bitcoin produced by miners daily through transaction verification has been reduced from 900 to 450, and the reward for miners has been halved from 6.25 bitcoins to 3.125 bitcoins.
Following the news, bitcoin prices slightly declined, now fluctuating above $63,000.
Although bitcoin prices have soared to record levels after past "halving" events, market observers, including analysts from JPMorgan and Deutsche Bank, had previously predicted that the impact of this "halving" had largely been pre-digested by the market.
Compared to bitcoin itself, this "halving" has a greater impact on miners.
On the eve of the halving, bitcoin miner stocks were volatile, with Riot Platforms closing down about 41% on Friday, but had surged 356% in 2023. So far this year, most bitcoin miner stocks have seen double-digit percentage declines, in sharp contrast to the 300% to 600% increases seen in 2023.
Focus on US GDP Growth
Looking ahead to next week, investors will turn their attention to the US and UK April S&P Global Manufacturing and Services PMI preliminary values released on Tuesday, and the US March Durable Goods Orders data on Wednesday.
On Thursday, the market will welcome the US first-quarter GDP report, weekly initial jobless claims, and pending home sales data.
In addition, speeches by policymakers from the Bank of England and developments in Middle East geopolitics will be closely watched.
Among the "Big 7" tech giants, more than half will release their latest financial reports next week, but the market remains skeptical about their ability to fulfill the high expectations driven by the #AIBoom.
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