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Weekly Outlook

Our rundown on the most interesting and market-impacting stories this week.

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Singapore Increasingly Seen as Safe Haven For Chinese Wealth

As Beijing’s crackdown on the country’s wealthy continues under president Xi Jinping’s “common prosperity” policy, an increasing number of China’s affluent are moving their money to Singapore and setting up family offices. Singapore’s attractiveness stems from its large Chinese-speaking population, lack of wealth tax, and relative proximity. The trend started in 2019 following the economic disruption caused by mass protests in Hong Kong. Further crackdowns by the Chinese government on China’s education and tech industries have spurred further movements of assets out of the country. 

US Yield Curve Inverts For First Time Since August 2019

On Tuesday, for a brief moment, the yield on the 10-year US Treasury note moved below that of the 2-year note. This is known as an inversion of the yield curve and is a warning sign that has predicted almost every recession in the past. While long-term Treasury bond interest is conventionally higher than the short term’s an inversion occasionally happens when the market turns pessimistic, especially during volatile times – like an ongoing war, pandemic, and unprecedented inflation all happening at the same time. However, it should be noted that the yield inversion has since reversed and that bond prices are just a signal, and do not trigger recessions. For now, market reactions are mixed, and whether there will be a recession or not remains to be seen. 

German Inflation Hits 40-Year High

Inflation in Germany, Europe’s largest economy, has risen to its highest rate in four decades as the Russia-Ukraine conflict has sent energy prices jumping almost 40% year on year. European Central Bank president Christine Lagarde has warned of a “supply shock” resulting from the Russia-Ukraine war, which has severely impacted energy prices since Germany relies on Russia for almost more than 30% of its crude oil, and more than 50% of its natural gas needs. Harmonised consumer prices (which also take into account residential property, unlike the CPI) in Germany have increased by 7.6%. Meanwhile, analysts warn that, if Russian energy was cut off, inflation could hit as high as 9% in Germany. 

Biden to Release 1 Million Barrels of Oil a Day

US President Joe Biden has pledged to release an unprecedented 180 million barrels of oil from the Strategic Petroleum Reserve in the next six months. This is almost a third of the US’s reserves being released. While the move contradicts Biden’s election promise to combat climate change, it will aid in cooling inflation and energy prices – the latter of which has soared in response to the Russia-Ukraine conflict. Oil prices have held aboveUS$100 for much of the time since Russia’s invasion of Ukraine prompted wide sanctions against the aggressor country.

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