22 Jun

Today, investors’ attention is focused on the speech of the Fed gov, as well as the data on inflation in the UK and Canada

June 22, 2022

by JustForex

At the close of the stock market yesterday, the Dow Jones Index (US30) increased by 2.15% and the S&P 500 Index (US500) added 2.45%. The NASDAQ technology index (US100) jumped by 2.51% on Tuesday. All 3 indices closed the day in the plus.

US Fed member Barkin said yesterday he supported a 75bp interest rate hike at the June meeting. Barkin also pointed out that US inflation is broad-based, and it is important to get back to the 2% target as soon as possible. Barkin will likely support another 0.75% rate hike at the next meeting. The US Federal Reserve Chairman Jerome Powell will be addressing Congress tonight, where investors will be looking for additional clues as to whether another 75 basis point rate hike is expected at the Fed’s July meeting. If Powell is hawkish tonight, investors could see another jump in the US dollar as government bond yields rise again. This will push gold down.

According to the National Association of Realtors, sales of existing homes in the US fell by 3.4% in May to a seasonally adjusted annual rate of 5.41 million units. That’s the weakest reading since June 2020, which was in the early months of the Covid pandemic. “I expect home sales to decline further,” said Lawrence Yun, Chief Economist at the National Association of Realtors.

Since about 25% of Americans keep their savings in real estate, declining home sales point to signs of a recession. However, White House spokeswoman Karine Jean-Pierre pointed out yesterday: “We’re not seeing a recession right now. We’re not in a recession right now. We are now in a transition period where we are moving to the point of stable and sustainable growth.” According to the Deutsche Bank CEO, the probability of a recession in Europe and the US is quite high in 2023.

Removing tariffs on Chinese imports would eventually lower US inflation by 1% and restore confidence in the economy, which could help President Joe Biden in the election, according to former US Ambassador David Adelman.

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Stock markets in Europe mostly traded higher yesterday. German DAX (DE30) gained 0.20%, French CAC 40 (FR40) added 0.75%, Spanish IBEX 35 (ES35) lost 0.61%, and British FTSE 100 (UK100) was up 0.42%.

Fitch Ratings notes that the ECB’s planned “anti-fragmentation” program may reduce the risk that sharp fluctuations in the cost of sovereign borrowing will adversely affect the debt dynamics of the Eurozone’s sovereign countries with high levels of debt. This will support the creditworthiness of these sovereigns. European Central Bank Chief Economist Philip Lane confirmed yesterday that the ECB would raise interest rates by 25 basis points at its July meeting. Still, the size of its September hike will depend on new economic data.

Oil continues to rise in price amid strong demand and tight supply. A preliminary Reuters poll showed that oil inventories are likely to show another decline. UBS analyst Giovanni Staunovo said that despite concerns about economic growth, the data still showed firm demand for oil. “We expect oil demand to improve further due to the China’s opening, summer travel, and warmer weather in the Middle East. As supply growth lags behind demand growth in the coming months, we still expect oil prices to rise,” he said.

Actual supply cuts from Russia are pushing up natural gas prices, as supplies through the key Nord Stream pipeline have fallen to about 40% capacity. Underlying European gas futures jumped by 4% from Friday.

Asian markets closed yesterday on the plus side. Japan’s Nikkei 225 (JP225) gained 1.84%, Hong Kong’s Hang Seng (HK50) added 1.87%, and Australia’s S&P/ASX 200 (AU200) closed 1.41% higher. The Japanese yen fell against the US dollar to its lowest level since October 1998 as the Bank of Japan’s ultra-soft monetary policy contrasted sharply with the aggressive Federal Reserve A meeting between central bank governor Kuroda and Prime Minister Kishida failed to result in any action to strengthen the yen.

Main market quotes:

S&P 500 (F) (US500) 3,764.79 +89.95 (+2.45%)

Dow Jones (US30) 30,530.25 +641.47 (+2.15%)

DAX (DE40) 13,292.40 +26.80 (+0.20%)

FTSE 100 (UK100) 7,152.05 +30.24 (+0.42%)

USD Index 104.47 -0.23 (-0.22%)

Important events for today:
  • – UK Consumer Price Index (m/m) at 09:00 (GMT+3);
  • – UK Producer Price Index (m/m) at 09:00 (GMT+3);
  • – Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
  • – Switzerland SNB Chairman Thomas Jordan speaks at 16:00 (GMT+3);
  • – US Fed Chair Powell Testifies at 16:30 (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.


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