World Economic situation and inflation

Asian stocks were mostly stagnant on Tuesday as investors grappled with inflation concerns following the surprise cuts to OPEC+ group’s oil output targets. This announcement led to a 6% overnight jump in Brent crude, which was up 0.5% to $85.39 per barrel.

The economic data released on Monday showed a slump in US manufacturing activity in March, hitting its lowest level in almost three years as new orders plummeted. Analysts predict that activity may decrease further due to tighter credit conditions. This downward trend has been ongoing since May last year and the recent banking turmoil has further eroded confidence.

ANZ analysts noted that manufacturing is one of the most rate-sensitive sectors of the economy, with goods like autos primarily being bought on credit. This sector’s decline could be an indicator of an upcoming recession, which would affect the entire economy.

Early in the Asian day, MSCI’s broadest index of Asia-Pacific shares outside Japan was trading steadily. Japan’s Nikkei stock index rose 0.24%, while Australian shares were up 0.1%. However, China’s blue-chip CSI300 index edged down 0.16% in early trade, while Hong Kong’s Hang Seng index opened 0.64% lower.

On Monday, energy shares helped lift world stock indexes following the surprise cuts that could push oil prices towards $100 a barrel. The S&P 500 energy sector index surged 4.9%, with Chevron Corp, Exxon Mobil Corp, and Occidental Petroleum Corp all rallying more than 4%.

However, the prospect of higher oil costs added to inflation worries on Wall Street, just days after evidence of cooling prices raised expectations that the US Federal Reserve might soon end its aggressive monetary tightening campaign.

The Dow Jones Industrial Average rose 0.98%, the S&P 500 gained 0.37%, and the Nasdaq Composite dropped 0.27%. Shares of Tesla Inc fell 6.1% after disclosing March-quarter deliveries rose just 4% from the previous quarter, even after CEO Elon Musk slashed car prices in January to boost demand.

Market watchers are trying to gauge how much longer the Fed may need to keep raising interest rates to cool inflation and whether the US economy may be headed for a recession. Treasury yields retreated after the US manufacturing data, increasing expectations for some investors that the Fed will cut rates later this year as the economy slows.

The yield on benchmark 10-year Treasury notes was last at 3.4263%, compared with its US close of 3.432% on Monday. The dollar reversed some losses but remained on the defensive after losing ground on Monday in the wake of the weak US economic data. The US dollar index was last up at 102.11, while gold was slightly lower at $1982.19 per ounce.

In Asia, markets were mixed, with the Nikkei 225 up 0.24%, the Hang Seng down 0.64%, and the Shanghai Composite down 0.16%. In Australia, the S&P/ASX 200 was up 0.1%.

Investors are closely monitoring the situation as rising inflation and interest rates could put pressure on equity markets. The Fed’s monetary policy is expected to be a key driver of market movements in the coming months.

In addition, concerns over the global supply chain continue to weigh on the markets. With the ongoing COVID-19 pandemic disrupting manufacturing and logistics, many companies are struggling to get the supplies they need to produce their products.

Despite the mixed performance in Asia, US stocks managed to end higher on Tuesday, with the Dow Jones Industrial Average and the S&P 500 both closing at record highs. Investors appear to have shrugged off concerns about inflation and weaker-than-expected manufacturing data, instead focusing on positive earnings reports from some major companies.

The Dow Jones Industrial Average rose 64.71 points, or 0.19%, to close at 34,527.19, while the S&P 500 gained 7.45 points, or 0.17%, to end at 4,202.04. The Nasdaq Composite fell 3.90 points, or 0.03%, to close at 14,055.70.

Shares of Alphabet Inc, Google’s parent company, rose 3.6% after the company reported strong earnings and revenue growth for the first quarter, driven by strong advertising demand. Inc also beat earnings estimates, sending its shares up 0.6%. However, Facebook Inc shares fell 1.3% after the company warned of a significant slowdown in revenue growth in the coming quarters.

Meanwhile, oil prices continued to rise, with Brent crude futures up 0.6% at $68.38 per barrel, while US West Texas Intermediate crude futures rose 0.5% to $65.78 per barrel. The OPEC+ group’s surprise decision to maintain its output cuts and Russia’s pledge to further curtail its production helped boost prices.

In Europe, stocks closed lower on Tuesday, with the Stoxx Europe 600 index falling 0.6%. The FTSE 100 in London dropped 0.8%, while the CAC 40 in Paris and the DAX in Frankfurt both fell 0.5%.

Investors remained cautious amid concerns about rising inflation and a possible slowdown in the global economic recovery. Data released on Tuesday showed that eurozone inflation rose to 1.6% in April, above the European Central Bank’s target of just below 2%, adding to pressure on policymakers to start winding down stimulus measures.

In Asia, shares were mixed on Wednesday as investors continued to grapple with the inflation outlook and concerns about the global economic recovery. Japan’s Nikkei 225 index fell 0.5%, while South Korea’s Kospi index rose 0.4%. Hong Kong’s Hang Seng index was little changed, while the Shanghai Composite index slipped 0.2%.

On the other hand, cryptocurrency prices fell sharply on Tuesday, with Bitcoin dropping as much as 5% to trade below $54,000. The decline came after Tesla Inc CEO Elon Musk tweeted that the company would no longer accept Bitcoin as payment for its vehicles, citing concerns about the environmental impact of Bitcoin mining.

In other markets, gold prices were little changed, while the US dollar edged higher against a basket of major currencies.

Looking ahead, investors will be closely watching the US Federal Reserve’s policy statement and press conference later on Wednesday, as they try to gauge the central bank’s stance on inflation and the economic recovery. Many analysts expect the Fed to maintain its current policy stance, but some believe that policymakers could signal a shift in their approach if inflation continues to rise.

The global economic outlook remains uncertain, as investors weigh the potential risks and rewards of different asset classes and try to navigate the rapidly changing landscape. While some are optimistic about the prospects for a strong economic recovery, others remain cautious, pointing to the ongoing pandemic and other geopolitical risks as potential threats to global stability. As always, the key to success in investing will be to remain vigilant, stay informed, and adapt quickly to changing market conditions.