Concern continues in the world’s main stock markets about the performance of the dollar as inflation in the United States continues unabated.
The dollar has been a source of concern for investors, while companies are listed on the world’s most traded stock exchanges, such as Wall Street.
The USA Herald noted that “the second largest publicly traded company in the US said it forecast revenue of between $51.94 billion and $52.74 billion in the fiscal fourth quarter ending June 30, compared with previous forecasts of $52.4 billion to 53.2 billion dollars.
Diluted earnings are now expected to be between $2.24 and $2.32 a share, down from the previous forecast of $2.28 to $2.35.
According to data provided to The USA Herald in recent hours, Microsoft has cut its revenue and earnings outlook for the current quarter citing currency fluctuations, becoming the largest US company to lower its figures due to the strength of the dollar.
The adjustments, announced at a securities presentation on Thursday, were in response to the latest movements in the exchange rate. Shares of Microsoft recovered from an initial drop of as much as 3.8 percent to end the day up 0.8 percent.”
Between inflation in pesos and inflation in dollars, Argentines are trapped. Investors around the world are hedging against the weakness of the US currency.
Investors return to China
Investors from around the world are returning to China’s stock markets after a sell-off earlier this year in 2022.
Apparently “now some international money managers are betting the worst is over. Offshore investors using Hong Kong’s Stock Connect trading scheme bought a net 28 billion yuan ($4.2 billion) of mainland Chinese shares during last week. That still leaves total holdings below their January peak, but it also comes as the CSI 300 has gained almost 9% from the low point in April.”
“It is a good time to go back to the market, in relative and absolute terms,” Vincent Mortier, chief investment officer at Amundi Asset Management, which manages €2tn worth of funds, told the FT. “The current weakness in prices is a great opportunity in equities and credit.”
The dollar loses ground
The multilateral organization once again charted how the dollar is losing ground as a store of value to support the currencies issued by other central banks.
In a report by Serkan Arslanalp (Deputy Head of Balance of Payments Department of Statistics), Barry Eichengreen (University of California), and Chima Simpson-Bell (Economist, Africa Department), he reports:
The US dollar has long held an outsized role in world markets. It continues to do so even as the US economy has been producing a declining share of world output for the past two decades.
However, although the currency’s presence in global trade, international debt, and non-bank lending still exceeds the US share of international trade, bond issuance, and lending, central banks have not they hold the dollar in their reserves to the extent that they ever did.
The dollar’s share of global foreign exchange reserves fell below 59% in the final quarter of last year, extending a two-decade slump, according to data from the FMI’s Monetary Composition of Official Foreign Exchange Reserves.
In an example of the broader change in the composition of foreign exchange reserves, the Bank of Israel recently revealed a new strategy for its more than $200 billion of reserves. Beginning this year, it will reduce the US dollar share and increase portfolio allocations to the Australian dollar, Canadian dollar, Chinese renminbi and Japanese yen.