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Interviewed by Dubai TV, Mohammed Hashad, Head of Research and Development at Noor Capital and member of the American Society of Technical Analysts, shed light and commented on the developments in financial markets, most notably on crypto crash and Fed Chair Jerome Powell’s upcoming testimony before the Congress.
European Equities:
Asked, as markets await Christine Lagarde’s speech and European markets being volatile today, what factors could support European markets, Hashad pointed out that today there was a marginal rise in the performance of European stocks, as there is a kind of improvement in investor sentiment after the sharp declines during the past week. He also added that the dominant feature of the performance of European stocks is the bearish feature, as they suffer from severe selloff pressures.
The Bank of England raised rates last week for the fifth time in a row, and the Swiss National Bank has also hiked rates for the first time since 2007. Accordingly, Hashad said that Christine Lagarde during her speech today will try to reassure the markets and ensure the gradual transition from negative interest to positive interest.
Hashad believes that the only thing that can support European stocks is if Christine Lagarde talks about ruling out raising interest rates by 50 basis points and only raising interest rates by 25 basis points.
Crude Oil
With the EU’s gradual plan to abandon Russian oil, and whether China could be able to compensate for the European share, Hashad explained that China is the second largest consumer of energy, but the demand stance will be more obvious only when China resumes normal life and lift lockdowns in Beijing and Shanghai.
As for crude oil, it is still in the negative direction, as Nymex crude lost more than 9 percent of its value due to recession-related concerns.
When asked about his expectations for oil prices this summer, Hashad indicated that on the technical level, unless markets witness any trades above 110 levels during today’s and next week’s trading, we may witness a corrective tendency towards $102 per barrel.
Cryptocurrencies
Bitcoin and cryptocurrencies are dropping and trading below the $20,000 level, Hashad expects that Bitcoin is trying to stabilize again above the $20,000 level, but the cryptocurrency sector is witnessing a sharp drop to its lowest level in years, and there are multiple losses after the Fed announced an interest rate hike of 75 basis points.
Cryptocurrencies have been trading within known ranges and levels since August 2019, and the trend adopted by central banks and the withdrawal of liquidity from the markets together created a state of mistrust in cryptocurrencies and a trend favouring safe haven currencies, with the US dollar in the lead.
Bitcoin has lost about 60% of its value since the beginning of the current year, and Ethereum has lost nearly 90% of its value. Hashad believes that the general trajectory of cryptocurrencies is downward.
When asked about the most important events that the markets are anticipating this week, Hashad said that the markets are awaiting Christine Lagarde’s speech and inflation data from the UK, in addition to Jerome Powell’s testimony before the Congress.
Recession Concerns, US Economy
There is news that economic analysts expect the US economy to fall into a recession. According to the Wall Street Journal, a recession in the US economy will take place over the next 12 months.
Hashad pointed out that the percentage of economists who expect a recession in the US economy has already increased to 85%, with the continued soaring inflation, and the Federal Reserve faces a big problem, which is the continuation of hiking interest rates and the continued accelerating inflation to high levels, towards 8.6%. This may lead to stagflation, while Hashad expects that US markets are still far from recessionary areas.
Gold Prices
Asked why gold doesn’t perform as a safe haven, and why gold prices are still far from $2000 per ounce, Hashad replied that the reason behind this is the increasing pressures from the rise of the US dollar and the rise in US Treasury bond yields supported by the rise of the dollar, as well as the continued rise in interest rates or the shocking policy of the Federal Reserve, which puts pressure on gold.
Jerome Powell’s Testimony
Hashad believes that Jerome Powell will talk in general about interest rates and about inflation, his view may differ on inflation, and he will say that inflation levels will not continue to rise, and he will rule out mentioning the 2% target levels, which indicates that low inflation is still a difficult mission.
