Stock markets are once again under pressure from recessionary sentiment. Saudi Arabia is ready to pump more oil

by JustForex

The US stock market closed yesterday in red territory. At the stock market’s close, the Dow Jones Index (US30) decreased by 0.16%, while the S&P 500 Index (US500) lost 0.30%.The NASDAQ Technology Index (US100) was down 1.49%. Remarks by JP Morgan CEO Jamie Dimon about the economy raised new recession fears. In turn, the ISM manufacturing index and hawkish speeches of Fed officials yesterday were optimistic for the US dollar. Former New York Fed President William Dudley pointed out yesterday that the Fed needs to tighten financial conditions. The only way to do that is to raise interest rates substantially. Waller from the Fed said he supports tightening policy by another 50 basis points throughout several meetings. The ultra-hawkish Bullard noted that the current macroeconomic environment in the US is undermining the Fed’s confidence in inflation and that inflation expectations could lose support without action from the Fed, so aggressively raising rates to 3.5% is needed. As soon as possible, like this year.

The Bank of Canada took another aggressive step in its rate hike cycle, raising the overnight interest rate by 50 basis points for the second time in a row and warning that it could use even more “strong measures” to fight inflation if necessary. The minutes also said Russia’s invasion of Ukraine, China’s COVID lockdown, and continued supply disruptions put pressure on activity and rising inflation. The war has increased uncertainty and puts further upward pressure on energy and agricultural commodity prices.

Stock markets in Europe were decreasing yesterday. Germany’s DAX (DE30) lost 0.33%, France’s CAC 40 (FR40) decreased by 0.77%, Spain’s IBEX 35 (ES35) was down by 1.18%, Britain’s FTSE 100 (UK100) lost 0.98%. The ECB is likely to confirm its plans to halt asset purchases in early July and raise rates by 25 basis points later this month. Analysts see risks leaning toward higher interest rates and a stronger euro due to the ECB’s gradual shift toward a more hawkish stance and the market’s receptivity to such comments. The ECB forecasts that GDP growth will be revised downward.

Crude oil prices returned to positive territory on Wednesday as OPEC delegates did not discuss the possibility of excluding Russia from the global oil production agreement, as had been suggested a day earlier. But in the Asian session, oil prices fell sharply again after reports of Saudi Arabia’s intention to increase production in a sharp drop in Russian production.

The US 10-year Treasury bond yields jumped by 3% yesterday after the Federal Reserve launched its plan to reduce its balance sheet by nearly $9 trillion. And most interestingly, gold prices also jumped, though these instruments are usually inversely correlated.

Asian markets traded without a single dynamic yesterday. Japan’s Nikkei 225 (JP225) gained 0.65%, Hong Kong’s Hang Seng (HK50) lost 0.56%, and Australia’s S&P/ASX 200 (AU200) was up 0.32%. According to analysts, Asian markets decline because of high inflation as well as recession fears.

Main market quotes:

S&P 500 (F) (US500) 4,119.56 -12.59 (-0.30%)

Dow Jones (US30) 32,938.26 -51.86 (-0.16%)

DAX (DE40) 14,340.47 -47.88 (-0.33%)

FTSE 100 (UK100) 7,532.95 -74.71 (-0.98%)

USD Index 102.50 +0.75 (+0.74%)

• – Australia Retail Sales (m/m) at 04:30 (GMT+3);
• – Switzerland Consumer Price Index at 09:30 (m/m) (GMT+3);
• – OPEC+ Meeting at 13:00 (GMT+3);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US Crude Oil Reserves (w/w) at 18:00 (GMT+3);
• – US FOMC Member Mester Speaks at 20:00 (GMT+3).

by JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.