Copper continues to trade near lows not seen since the beginning of last year, amid strong pressure generated by weak economic expectations in the world. In Chile, the latest CPI will be known, while the dollar does not give up and causes more tension to the cost of living.
During this week in Chile the Consumer’s price index (CPI) corresponding to June, data that will be key to assess the inflationary outlook.
In that line, the sustained rise of the dollar could continue to put pressure on the cost of living in the country.
The currency continues to impose itself on other currencies, while in the United States the Fed could continue to apply rate hikes.
Dollar
The exchange rate in Chile continued with its rally alcista despite the sale of dollars implemented by the Ministry of Finance, reaching levels above $940 at times.
From Capitaria they commented that this week “we must be very attentive to the minutes of the last meeting of the US Federal Reserve”, since they could give more concrete signals on the evolution of rates.
“If we continue to see more aggressive rate hikes and a bigger hit to global economic activity, perfectly the greenback could go looking for new highs in the coming sessions”affirmed the head of trading studies at Capitaria, Ricardo Bustamante.
Macroeconomic data: Chilean CPI
In Chile this Friday the Consumer’s price index corresponding to June, data that will be key to assess the local inflationary perspectives. The sustained rise in the dollar could continue to put pressure on the cost of living, in particular by raising the cost of imported products.
Also at a local level, said Capitaria, “it will be interesting to assess the market’s view of the Tax reform announced by the Government, because two months after the Plebiscite, the local panorama begins to add new elements”.
On Thursday, the information on the change in non-agricultural employment in the United States will be revealed, while the rest of the information regarding employment, such as the unemployment rate and the average hourly income, will be known next Friday.
Fed Minutes
The minutes of the latest US Federal Reserve monetary policy meeting will be released on Wednesday.
If in these minutes there is a sign of greater aggressiveness in the next rate hikes in the world’s main economy, it is likely that the various stock market indices will show greater declines”, Capita detailed.
While the dollar could experience a greater appreciation at a general level, especially against currencies of emerging economies.
Copper, gold and other commodities
The price of copper continues to trade near lows not seen since early last yearin the midst of strong pressure generated by weak economic expectations in the world, considering that they directly impact demand projections for the red metal.
If figures continue to be released that point to further global economic weakening, perfectly the price of copper could go looking for new lows.
For his part, the Gold has shown significant downward force due to the appreciation of the dollar and the increase in the yield of treasury bonds. If we continue to see a greater rebound in the dollar in the coming days, the commodity could perfectly consolidate below $1,800 an ounce.
According to information to date from Finviz, the best performing assets this year have been commodities, except wood, oats, copper, among others, although they have fared better as a whole, in part, due to the massive rebound in the energy complex.
Wall Street
“The main Wall Street indices had a negative week again, closing the day with some corrections from the lows of the week. In this stage, investors continue to show fears due to weak economic projections worldwide, in addition to high levels of inflationwhich pushes the Fed to have more aggressive rate hikes”, commented the Capitaria market analyst, José Tomás Riveros.
All three major US stock indices ended the semester in negative territory, with the S&P 500 falling nearly 21%, its worst drop since 1970. Furthermore, the second quarter of the S&P 500 was the worst since the first quarter of 2020.
“These sharp falls are justified by all the stimuli and ultra-expansive monetary policies that we have experienced during the last two years. Where the main central banks of the world they have had to start raising the rate to control inflation, generating an economic disincentivewhich has installed fears in investors”, analyzed Riveros.
While the Dow suffered its biggest first-half percentage drop since 1962, the Nasdaq, which is packed with tech stocks, has taken an even bigger beating: it has plummeted more than 30% since its peak last November.
With a view to the second half of this year, highlights an analysis of “S&P Dow Jones Indices” which discovered that there is a minimal correlation between the performance of the S&P in its first half with the second half of the year.
The S&P 500 lost 21% in the first half of 1970, during a period of high inflation comparable to today’s environment, and then rose 27% during the last six months of that year.
Also, in 2020, it fell 4% in the first half and soared 21% in the second half of the year.
The odds look good for the rest of 2022, Capitaria said, as the market has discounted the probability of a mild recessionaccording to Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management.
Furthermore, there are signs of a inflation cooling as the personal consumption expenditures (PCE) price index for May, which the Federal Reserve uses for its inflation target, rose less than expected.