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Daily Wrap Up 05 April 2022

5 Apr 2022 04:31 PM

EU takes aim at Russian coal, stocks fall

Stock markets in continental Europe are under pressure as the EU announced plans to reduce its dependency on coal from Russia. The announcement comes 24 hours after it is believed that Russian forces intentionally targeted civilians in Ukraine. Tensions between Moscow and The West have ticked up, and that has prompted a decline in equities. A short while ago, the Russian government declared that it will be monitoring wheat exports to “unfriendly” countries, this is tantamount to a food shortage threat. Inflation was already rising prior to Russia’s invasion of Ukraine, and given that Russia is at odds with many countries around the world, it seems even higher inflation is on the cards. The DAX, the CAC and the FTSEMIB are in the red, while the FTSE 100 is showing a small gain. A rally in utility stocks, like SSE, National Grid and Severn Trent are helping the UK market.

Overnight, the Reserve Bank of Australia (RBA) kept interest rates on hold meeting expectations. The central bank issued an upbeat outlook for the economy, and traders took that as a sign the central bank will hike rates later this year, hence why AUD/USD hit its highest mark since June 2021. The bank stated that demand is strong, and the labour market is robust. At the same time, it commented that although inflation is rising, it is still lower than in other countries. It feels as if the RBA are content with the fundamentals of the economy, but they are waiting for inflation to spike before they pull the trigger with respect to interest rates.

It is a tale of two metals as gold is higher, while silver is lower. Gold retreated from the rally it enjoyed yesterday, although it is strange the asset is down while the overall mood is risk-off. Russia is a larger exporter of silver, and fears about supply have resurfaced in light of new sanctions.

The oil price rebounded in the past 24 hours as Western governments are looking to impose further sanctions on Russia. The Canadian dollar typically get pushed around by oil, and that is what we are seeing today. Even though, the US dollar has been trending higher lately, USD/CAD dropped to a 4-month low - which highlights the strength of the Canadian dollar. EUR/CAD fell to new 6-year low, this also underlines the strength of the “loonie”.

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