Investors like inflation and the NATO summit

18 July, 10:11 PM
On average, quotes rose by 3.1 percentage points over the week, fairly evenly across the curve (Photo:NBU / Flickr)

On average, quotes rose by 3.1 percentage points over the week, fairly evenly across the curve (Photo:NBU / Flickr)

This week we witnessed a real summer rally

The data from the United States overjoyed investors. First of all, inflation. It continued to decline, outpacing analysts' forecasts, and it amounted to 3% over the past month. This is an average U.S. inflation rate in the 21st century. These figures made investors happy, as they assumed that the rate hike was now definitely coming to an end. The U.S. economy is demonstrating miraculous resilience to this very hike. At least for now. As a result, the S&P 500 index gained 100 points over the week and opened on Friday morning at 4,510 points. The index has not been this high since April 2022, when it began its decline amid rising rates and Russian aggression against Ukraine. It seems there is no perfect storm to bury the market and burst all the bubbles. But that was not the case. The U.S. dollar fell against the euro amid lower expectations of rising rates. Now the dollar-euro exchange rate is close to $1.12 per euro.

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Not only American stocks are rising against the backdrop of American inflation. The rally has spread like a tsunami across global markets. In particular, unfortunately, it also affected the oil market, where the price of a barrel of Brent has surpassed $80 for the first time in a very long time. This was helped not only by the American rally, but also by another attempt by oil-producing countries to push prices up. So far, it has yet to reach the $100 per barrel that the sheikhs dream of, but given that Saudi Arabia is already buying up all the players in Europe who are not good on the field, they still have enough money. Russia has also joined the decline, as it has no time for footballers. This time, it seems, Moscow will not abandon its Arab friends. A sharp decline in Russian oil supplies to China and India is already being recorded. On the one hand, this may result from a new package of sanctions, which sent a special greeting to the gray carriers of Russian oil. Still, Russia may also present it as another gesture of goodwill, this time towards the Saudi prince and his Napoleonic plans.

Traditionally, the Chinese slowdown has helped to keep oil prices down. And it hasn't gone away. Comrades loyal to Xi's ideas have to deal with a wide range of problems, both in the real estate and debt sectors, especially municipalities. The methods of the Chinese Cultural Revolution in business, as demonstrated by Jack Ma, are not going unnoticed. And now, for example, Chinese university graduates with good diplomas, who already saw themselves as millionaires in a couple of years, cannot find a job after graduation. But this week, traditional Chinese fears were offset by the expectations of a conventional Chinese stimulus, demonstrating the loyalty of comrades from Beijing to traditional values and methods of dealing with problems in the economy.

The rally did not spare the Ukrainian segment of Eurobonds. Prices for sovereign debt rose in tandem. Our events have added to the external background, making investors look for the positive. The optimism that came to the markets after the Prigozhin rebellion was supported by the optimism that followed the NATO summit. Unlike the general Ukrainian public, cynical and rational investors did not expect a miracle from the summit and assessed its results as being positive. They started to make purchases. Which, according to some large American banks, are just beginning. As a result, the securities gained 4-5 points over the week. They reached a local maximum over the past year. Short Ukrainian securities are already trading at 31% of their face value. In the domestic market, the hryvnia exchange rate continues to remain surprisingly stable.

In Ukraine, inflation continues to decline sharply.

At the same time, it is outpacing all the rosy forecasts of analysts. As a result, the latest monthly data showed inflation at 12.8%. This is a sharp decline from about 15% a month ago. If not for the contribution of rising electricity prices for households, inflation would have been even lower, at 11.6%. Such a sharp decline in inflation simply leaves the National Bank no chance, and we should see a cut in the key policy rate in July. The intrigue remains around Sens Bank, formerly known as Alfa-Bank Ukraine. All the laws have been signed, and sanctions have been imposed, but the latter's nationalization may be postponed. And perhaps to the back burner. To a faraway table. A distant room. In your godforsaken dacha. Although, of course, Ukraine is a country of surprises.

P. S. A person who has never made a mistake has never tried anything new.

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