The world is full of optimism

5 February, 12:25 PM
This past January was the best January in many years (Photo:REUTERS/Valentyn Ogirenko/Illustration)

This past January was the best January in many years (Photo:REUTERS/Valentyn Ogirenko/Illustration)

This past January was the best January in many years. And many remembered the old legend of the stock market that as goes January, so will go the whole year

Optimism still reigns in world markets. This past January was the best January in many years, and many remembered the old stock market legends that January sets the tone for the whole year, and began to think about where they will park their yachts after receiving bonuses for the whole of 2023. The growth of interest rates in the US no longer scares speculators and traders so much, because everyone has seen the light at the end of the tunnel and is even cautiously hoping that rates in the U.S. in 2023 will not only stop growing, but even begin to decline. Inflation doesn't seem like such a scary beast anymore. Moreover, more and more optimistic forecasts are coming about the state of the world economy.  First it appeared that the consensus of analysts no longer promised a recession for the EU, although some EU members could experience economic downturns. And then the IMF revised its growth forecast for the global economy, raising it from 2.7% to 2.9% in 2023.

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As a result, on Friday morning, the S&P 500 index will open at around 4179 points, as high as it’s been since last August. The euro continues to strengthen.

The euro/dollar rate has already reached the level of 1.09 dollars per euro, pleasing American exporters and indicating how far the European Central Bank is lagging behind its American counterparts in raising the key interest rate. And all the fun, including in the real estate market, where mortgage prices should rise sharply, is yet to come in Europe. However, the United States has already blazed this trail, and going second is not so scary. Moreover, gas prices have ceased to frighten Europe. In all these rosy forecasts, it is annoying that the IMF expects, among other things, the growth of the Russian economy, which cannot but surprise us against the backdrop of an expanding Russian budget deficit and unabated sanctions pressure. However, the answer here may lie in the intricacies of the statistics on which the IMF relies. After all, these statistics are Russian-made, with a characteristic Russian spirit in which, for example, they talk about the growth of construction, while Russian metallurgists complain that the construction sector has reduced purchases of metal. Although, maybe in Russia they are remembering the best practices of their ancestors, who built without this metal of yours.

January was sunny for emerging markets as well. Again, the best start to the year in a very long time. True, the Ukrainian Eurobond segment did not share the general rejoicing, having remained virtually unchanged in recent weeks. Perhaps this is payback for the excessive optimism of the end of the year, when the markets expected either a quick peace against the backdrop of strange publications in the media, or a quick victory against the backdrop of the successes of the Ukrainian army near Kharkov and Kherson. Ukrainians can well understand these speculators, because they themselves have faced winter apathy and depression, when inflated autumn expectations collided with gray winter reality and new attempts by Russians to advance in Donbas, following, again, the advanced experience of their ancestors, where it was customary to love to die for some bloody dictator. As a result, the quotes on Ukrainian sovereign securities have remained around 20% of the nominal value. We’ve recently seen a slightly more positive mood in warrants.

And in Ukraine itself, the main event of the week is the Ukraine-EU summit, in which all the main European bureaucrats were not afraid to come to Kyiv. It is unlikely that a breakthrough can be expected from this summit; rather, we will have to work with expectations again. With expectations of a very quick accession to the EU, where the voices of the agrarian lobby have been increasingly heard lately, which has felt the heavy breathing of the agrarian superpower in its markets over the past year and is horrified at how much money they will lose if they encounter Ukrainian grain, or Ukrainian chicken. Not to mention the well-known Ukrainian eggs, which can be considered fatal. On the other hand, corrupt Ukrainian officials are in no hurry to embark on the path of correction, which hinders the path to Europe, even despite effective public shows right before the summit.

In the domestic market, the Ministry of Finance continues to raise money with the help of government bonds, due to the tightening of reserve requirements from the National Bank. Another ten billion hryvnias were raised this week. And in January, the government placed debt worth more than 40 billion hryvnia on the domestic market, which is more than, for example, the tax or customs intakes for that month. However, given the innermost desires of tax and customs officials, this is not surprising.. The hryvnia remains strong, gradually returning positions lost during the New Year holidays. Compensating for the mini seasonality that we were able to observe even this year. And as a result, now the exchange rate on the black (gray) market is 40.0-40.15, remaining in a modest range of within 10% of the official rate. How modest this range is can be seen in the example of Lebanon, whose brilliant government defaulted a couple of years ago, and this week said that the official rate needed to be multiplied by 9, in fact, devaluing the currency by 90%. Although even this decision did not allow Lebanon to approach Ukraine’s more comfortable 10% difference, and now the difference between the official exchange rate there and the black market is a factor of four.

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