May 16, 2022: The dollar started the week just off a 20-year high against peers on Monday, as investors sought safety due to fears about global growth while cryptocurrency markets appeared to find some stability after last week's turmoil.
The dollar index was at 104.54, having briefly crossed the 105 level on Friday, its highest since December 2002, after six successive weeks of gains.
Investors have flocked to the safe-haven currency on concerns about the U.S. Federal Reserve's ability to dampen inflation without causing a recession, along with worries about slowing growth arising from the Ukraine crisis and the economic effects of China's zero-COVID-19 policy.
"Broad USD strength is being supported by a mounting global growth concern," said Barclays analysts.
They said events to watch this week included U.S. retail and production data due Tuesday, as well as public remarks from several Fed officials.
"Focus will be on any potential reiteration/pushback on the notion that 75-basis point rate hikes are off the table for now."
Markets are pricing in 50 basis point hikes at the Fed's next two meetings, according to CME's Fed Watch tool, but with the possibility of larger increases.
Chinese retail and production data due later on Monday are also top of the agenda.
"A weaker growth outlook in China is likely to keep commodity G10 currencies under pressure and the USD supported," said Barclays.
The euro started the week languishing near its lowest level since early 2017, suffering due to the strong dollar and because of the European economy's exposure to the Ukraine conflict.
The single currency was at $1.0398 on Monday morning, only just above the $1.0354 level it hit on Thursday, its lowest since early 2017.
There are also plenty of speeches from top European Central Bank officials this week for investors to watch.
Sterling, which has suffered along with the euro, was at $1.2256 on Monday, having dropped as low as $1.2156 last week, hurt by softer than expected first-quarter GDP figures.
In the coming week, Britain has labor market data, inflation, and consumer confidence data.
The Japanese yen was a little softer on Monday morning at 129.43 yen per dollar. Last week it managed its first week of gains since early March, as growth fears meant U.S. Treasury yields paused their march higher.
With yields pinned down in Japan, the yen is vulnerable to higher U.S. yields.
Crypto markets, which trade around the clock, had a quiet weekend after turmoil last week driven by TerraUSD, a so-called stablecoin, breaking its dollar peg.
Bitcoin was trading at around $31,000 has dropped to $21,400 on Thursday, its lowest since December 2020.
May 16, 2022: China's daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing's order to increase supply to ensure the security of the country's energy supply, but the volume dropped from a record high set in March.
The immediate outlook for demand is not strong, however.
China, the world's top coal producer, mined 362.8 million tonnes of the fuel last month, data from the National Bureau of Statistics showed on Monday, equivalent to 12.09 million tonnes per day.
That compares with the record of 12.77 million tonnes per day in March and 10.74 million tonnes per day a year before.
Production over the January-April period was 1.45 billion tonnes, also 11% higher than in the same period a year earlier, the bureau's data showed.
China is aiming at lifting daily coal output above 12.6 million tonnes and building a national inventory of 620 million tonnes to ensure it has sufficient supply.
The government has also urged regions that largely rely on imported coal to sign more contracts of at least a year's duration with domestic coal producers, to secure supply.
China's central bank said that to support more output, it had allocated an additional 100 billion yuan ($14.7 billion) of loans dedicated to coal production, storage, and purchases by power plants.
Beijing has also set price caps for thermal coal under spot trade and term contracts to ease inflation pressures and balance profits between coal miners and utilities.
However, lean demand from downstream sectors, following a wide range of industrial plant shutdowns because of COVID-19 outbreaks, could weigh on further growth of coal output.
China's April power generation plunged to a level last seen in May 2020, with thermal power output dropping 12% from a year before.
Coal inventories at utilities in eight Chinese coastal regions reached 29.66 million tonnes by May 7, 25% higher than the same period last year, data tracked by China Coal Transportation and Distribution showed.
May 16, 2022: Gold edged up on Monday from a more than three-month trough hit in the previous session, as lower U.S. Treasury yields kept demand for zero-yield bullion afloat above the key psychological support level of around $1,800 per ounce.
Spot gold was up 0.1% at $1,812.15 per ounce, as of 0227 GMT. U.S. gold futures gained 0.1% to $1,809.80.
"With $1,800 being such a big round number, it's natural for it to provide some level of support as some (traders) try to be brave and buy a dip, whilst others close out profitable shorts," City Index's senior market analyst Matt Simpson said.
Marking their fourth straight weekly decline, gold prices fell more than 1% on Friday to the lowest since Feb. 4 at $1,798.86 per ounce, before closing at $1,811.15.
"But it's not looking great for gold bugs right now. Even if we do see a bounce from $1,800, the momentum clearly favours a further downside," Simpson said.
The dollar started the week just off a 20-year high against peers, as investors sought safety due to fears about global growth, and continued to make rival safe-haven gold less attractive for buyers holding other currencies.
However, benchmark U.S. 10-year Treasury yields fell, buoying demand for non-interest bearing gold.
Inflation will need to move lower for "several months" before Federal Reserve officials can safely conclude it has peaked, Cleveland Fed President Loretta Mester said Friday, adding she would be ready to consider faster rates hike by the September Fed meeting if the data do not show improvement.
Although seen as an inflation hedge, bullion is sensitive to rising U.S. short-term interest rates and bond yields, which raise the opportunity cost of holding it.
Spot silver was down 0.1% at $21.06 per ounce, platinum was unchanged at $938.46, and palladium rose 0.3% to $1,949.88.
May 16, 2022: Tesla Inc has delayed a plan to restore production at its Shanghai plant to levels before the city's COVID-19 lockdown by at least a week, according to an internal memo seen by Reuters.
The U.S. electric car maker originally aimed to increase output at its Shanghai plant to 2,600 cars a day from May 16, Reuters reported earlier this month citing another memo.
But the latest memo said that it plans to stick to one shift for its Shanghai plant for the current week with a daily output of around 1,200 units. It also said that it would now aim to increase output to 2,600 units per day from May 23.
Tesla did not immediately respond to a request for comment.
May 16, 2022: China's economic activity cooled sharply in April as widening COVID-19 lockdowns took a heavy toll on consumption, industrial production and employment, adding to fears the economy could shrink in the second quarter.
Full or partial lockdowns were imposed in dozens of cities in March and April, including a protracted shutdown in commercial centre Shanghai, keeping workers and shoppers confined to their homes and severely disrupting supply chains.
Retail sales in April shrank 11.1% from a year earlier, the biggest contraction since March 2020, data from the National Bureau of Statistics (NBS) showed on Monday, and worse than forecast.
Dining-out services were suspended in some provinces, which led to a 22.7% drop in catering revenue in April. China's auto sales plunged 47.6% from a year earlier as carmakers slashed production amid empty showrooms and parts shortages.
As the anti-virus measures snarled supply chains and paralysed distribution, industrial production fell 2.9% from a year earlier, below expectations for 0.4% growth. The reading was the largest decline since February 2020.
In line with the decline in industrial output, China processed 11% less crude oil in April than a year earlier, with daily throughput falling to the lowest since March. The country's April power generation also fell 4.3% from the previous year, the lowest since May 2020.
The shock also weighed on the job market, which Chinese leaders have prioritized for economic and social stability. The nationwide survey-based jobless rate rose to 6.1% in April from 5.8%, the highest since February 2020 when it stood at 6.2%.
The 6.7% jobless rate in 31 major cities in April is the highest since records started in 2018.
The government aims to keep the jobless rate below 5.5% in 2022.
China wants to create more than 11 million jobs, and preferably 13 million urban jobs this year, Premier Li Keqiang said in March, but he recently called the country's employment situation "complicated and grim" following the worst COVID-19 outbreaks since 2020.
Fixed asset investment, the main driver that Beijing is counting on to prop up the economy as exports lost momentum, increased 6.8% year-on-year in the first four months, compared with an expected 7.0% rise.
The extended lockdown in Shanghai and prolonged testing in Beijing are adding to the concerns about economic growth over the rest of the year, said Nie Wen, Shanghai-based economist at Hwabao Trust.
"It's still possible to achieve a GDP growth of around 5% this year if COVID curbs are only going to affect the economy in April and May. But the virus is so infectious, and I remain concerned about growth going forward."
Analysts say Beijing's official 2022 growth target of around 5.5% is looking harder and harder to achieve as officials maintain draconian zero-COVID policies. Moreover, the key property market is in a protracted slump and export growth has slowed to a two-year low.
The economy grew 4.8% in the first quarter.
China's financial authorities said on Sunday they will let banks cut the lower limit of interest rates on home loans based on the corresponding tenor of the Loan Prime Rate for first home purchases, a move to support housing demand and promote healthy development of the country's property market.
ING analysts are looking for a 1% contraction in economic growth in the second quarter from a year earlier, while Nomura said the Chinese economy has been facing a rising risk of recession since mid-March.
Capital Economics is now forecasting full-year Chinese growth of just 2%, and says if COVID cannot be controlled even that is not guaranteed.
"Even once the current virus wave is quashed, COVID controls will continue to hold back activity to some degree over the coming quarters," it said in a note on Friday.
While policymakers have repeatedly pledged more support for the slowing economy, stimulus so far has been "underwhelming", with only small policy rate cuts, it added.
China's central bank rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a fourth straight month on Monday.
Nie said authorities would be cautious in rolling out quantitative measures like large-scale cuts to interest rates or banks' reserve requirement ratios to spur the economy, given concerns about U.S. interest rate hikes and a depreciating Chinese currency, but structural and targeted measures, such as in the property sector, would be preferred.