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Gold retreats after reaching highest level in a month

US stocks, government bond and gold prices seesawed on Monday as investors grappled with worries over a weakening global economy and looked ahead to a busy week of corporate earnings and speeches from central bankers.

The US blue-chip S&P 500 share index swung from gains to losses in thin trading before ending the day almost exactly where it had closed after the previous session. The tech-heavy Nasdaq Composite closed 0.1 per cent lower. Trading volumes in stocks in the S&P 500 were about 20 per cent below recent averages, according to Bloomberg data.

Gold, which typically advances during periods of uncertainty, rose as much as 1.2 per cent to $1,998 a troy ounce, reaching its highest level in more than a month, before falling back to $1,977, a 0.1 per cent increase.

A broad MSCI index of equities markets in the Asia-Pacific region dropped 1.1 per cent, its second consecutive day of declines. Big European markets were closed for the Easter Monday holiday.

Government bonds also struggled for direction, with the 10-year US Treasury eventually gaining 0.03 percentage points to 2.86 per cent. Yields move inversely to price.

The cautious start to the trading week followed China’s release of a flurry of economic data. Gross domestic product rose 4.8 per cent in the first three months of 2022 compared with the same period in 2021, exceeding market expectations.

But economic activity data for March revealed how Beijing’s zero-Covid policy, including the lockdown of Shanghai, has eroded the growth outlook of the world’s second-biggest economy. Retail sales declined 3.5 per cent in March from the same month in 2021, the first year-on-year fall since July 2020; the annual rate of increase in industrial production slowed; and indicators tracking China’s struggling property market further deteriorated.

“While the March data shows notable slowing in growth momentum, with the escalation in zero-Covid policy and broadening disruption on economic activity, the drag on economic activity will likely be larger in April compared to March,” JPMorgan analysts said.

JPMorgan reduced its forecast for China’s GDP growth in 2022 from 4.9 per cent to 4.6 per cent. Barclays also trimmed its estimate for 2022 growth from 4.5 per cent to 4.3 per cent.

The latest bout of concerns over China added to investor uneasiness over global central banks’ plans to tighten monetary policy in an attempt to rein in raging inflation. Indeed, US natural gas prices rallied 10 per cent to $8.03 per metric million British thermal unit on Monday — the highest level since 2008.

Investors will closely watch speeches from Federal Reserve officials this week, including chair Jay Powell, that may give further guidance on how aggressively policymakers will raise interest rates this year.

Jan Hatzius, chief economist at Goldman Sachs, said at the weekend that the US central bank faced a “hard path to a soft landing” as it attempted to push the inflation rate down to its 2 per cent target, from 8.5 per cent, by sharply boosting borrowing costs and reducing the size of its $9tn balance sheet.

Hatzius sees a 15 per cent chance that the US will fall into recession in the next year and 35 per cent that it will do so in the next 24 months.

Investors also digested the latest batch of corporate results. Bank of America on Monday reported better than expected earnings fuelled by a lending rebound and higher interest rates.

First-quarter earnings season in the US started on a decent footing, with companies in the S&P 500 so far reporting earnings 7.5 per cent higher than estimates, according to FactSet.

However, less than a tenth of companies on the blue-chip index have updated the market, and investors will have a better picture of the overall outlook by the end of this week, when a further 67 constituents including Netflix, IBM and American Express will have reported results.

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