Daily Market Commentary 8th December 2022

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Asian and European markets traded lower, following the heavy losses suffered on Wall Street, the previous session. Fears  of a long and deep recession are growing, as Central Banks drive interest rates higher to combat rampant inflation. The recession has cut energy demand, while ironically, the recession will also curb inflationary pressures. Oil prices continue to tumble, falling to US$72/barrel, with the European price cap on Russian oil and China demand lower. China continues to re-open, which should improve commodity demand, although the energy deal with Russia ensures discounted prices improving competitivemess. The AUD was boosted back above 0.6700, with a strong GDP number reaffirming their relatively strong economic position. The NZD Dollar rallied back above 0.6350, supported by the weaker reserve and an aggressive monetary policy from the RBNZ.

European equities continue to suffer, with wall-to-wall bleak economic data, ensuring a deep and dark recession. EU GDP was still positive, probably elevated by the ECB’s belated assault  on runaway inflation. Energy prices may have tempered the European decline, but winter will drive gas demand, which remains destructively high. The high price of heating and electricity across Europe, is hitting the consumer and business hard, raising cost prices so high it is hard to remain competitive. The recessionary fears have raised further questions regarding the Fed’s monetary policy. Markets are hoping for a slowing in the increments of rate rises, which has dampened enthusiasm for the US Dollar and allowed the EUR to regain 1.0500. Markets will focus on the unfolding Fed speculation, while local markets will monitor Japanese GDP numbers.

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