MARKET COMMENTARY
April started with rising indexes, led by technology shares, with the news that Elon Musk bought 9.2% of Twitter. However, risk appetite was suppressed when FED official Brainard said that FED will continue to tighten its policies systematically and shrink its balance sheet rapidly as of May.
Among the remarkable items in the minutes of the FED's meeting held on March 15-16, it was stated that it would be appropriate to narrow the balance sheet to $95 million per month. It was also seen that many officials agreed to increase by 50 basis points, but accepted an increase of 25 basis points due to Russia's invasion of Ukraine, and that one or more 50 basis points would be appropriate in the future. The minutes showed that worries among officials that inflation was rising to levels that could pose a threat to the economy were intensified.
While Russian President Vladimir Putin stated that the agreement talks have come to a deadlock once again; US President Joe Biden has announced that the US will expand the size and scope of weapons it provides to Ukraine with a new $800 million military aid package.
In addition, the International Monetary Fund lowered its global growth forecasts for 2022 and 2023, saying that the economic impact from Russia's invasion of Ukraine will spread everywhere.
While Euro continued to fell with expectations that sanctions against Moscow would be increased due to allegations that Russia killed civilians in Ukraine, USD was supported by the loss in the Euro. The fact that the published FED minutes remained above expectations supported the rise in the dollar with the loss in Euro.
The dollar index, which retreated to the level of 99.750 for a short time, after the inflation data, continued to rise with the rising commodity prices amid the unrest in Israel and the intensifying war in Ukraine, as the dollar strengthened its shelter status.
On the other hand, James Bullard, one of the FED chiefs, said that the 75 basis point interest rate increase should be evaluated if needed. Neel Kashkari explained that the FED would have to "do more" to curb inflation if lockdowns in China further aggravate supply chain disruptions. Chicago FED President Charles Evans, who was in favor of 25 basis point rate hikes just a month ago, said he would not be bothered by rate hikes this year, which will include two 50 basis point hikes. These explanations were perceived as hawkish.
FED Chairman Powell's statements on a front-loaded rate hike and 50 basis points on the table at the May meeting were also met with hawkishness and led to sales.
US indexes ended April with Dow Jones 4.91%, S&P 500 8.80% and Nasdaq 13.26% loss.
The dollar index, started April at the level of 98.934, and ended the month at 102,959 with a premium of 4.73% with the news flow. Against the dollar, the euro fell 4.74% and the pound 4.28%.
On the economic data side, the March inflation data in the USA was announced on the headline, with an increase of 1.2% on a monthly basis in line with the expectation and an increase of 8.5% on an annual basis, despite the expectation of 8.4%. In the core, it was announced as 0.3% against the 0.5% expectation on a monthly basis and 6.5% against the 6.6% expectation on an annual basis.
Retail Sales came in at 0.5%, from 0.6% expected in March.
In the Beige Book, it was stated that the FED's increasing costs were passed on to consumers by companies over higher prices and this trend is expected to continue. He emphasized that the difficulties in finding employees continue despite the tightness in the employment market and increasing wages, that the most position changes are seen among low-wage workers, while the demand for housing continues to be strong, the supply remains limited.
While the manufacturing PMI data for April was announced at 59.7, above the expectations, the services data was realized as 54.7, below the forecasts.
In China, Caixin PMI Services data fell 8.2 points to 42, below the expectation of 49.7.
China's CPI and PPI data, on the other hand, came in at 1.5% and 8.3% YoY, respectively, above expectations.
GDP 1st quarter data was announced as 4.2%, better than the expected 4.2% and 4.8% in the previous data.
Eurozone PPI rose 1.1% in February, versus 1.2% expectations.
While the ECB kept the interest rate unchanged at -0.5% in line with the expectations, more dovish statements were followed compared to the FED.
The expectation that more sanctions will be imposed on Russia in oil prices created supply concerns and supported prices upwards.
However, there was a decline in prices due to the subsequent announcement that they would release 240 million barrels of oil from the reserves in order to close the gap in the markets, and the demand-reducing effect of the pandemic restrictions in China.
The prices, which started to rise again with Putin's statement that the neogations were deadlocked and the production might decrease in Russia, which is struggling with sanctions, ended April with a premium of 1.33% for Brent oil and 4.40% for US crude oil.
Despite the gains in the dollar index at the beginning of April, the pressures stemming from the crisis in Ukraine and increasing inflation increased the attractiveness of gold, which is seen as a safe haven, and gold failed to maintain this momentum and closed at $1,896 with a monthly loss of 2.11 percent.
LME copper started April strong at $10,368, supported by the decline in Chilean production and the possibility of further sanctions against Russia increasing the risk of supply shortages and hovered in the $10,153-$10,580 range until the last week of the month.
Supported by the US inflation data, LME copper maintained its strong course with China's announcement that it would take steps to support the economy.
However, LME copper, which has turned its direction down again with the strengthening dollar and demand concerns in China, has seen a decline due to China's decision to keep the benchmark interest rates constant instead of lowering them, and the decline in global indices.
LME copper, which fell below the level of $10,000 in the last week of the month, ended April with a loss of 6.30% at $9,714.
Another factor that affected prices downwards was the increasing stocks in the LME, with the stocks rising to their highest levels since October 2021.
