12 Jul

Global stock markets are under pressure again. The euro reached parity with the dollar

July 12, 2022

By JustForex

The US Stock Indices fell on Monday as investors expected a weak reporting season and negative inflation data for June. Despite a strong labor market, investors are still wary of a recession and waiting to hear from company executives about costs, supply chains, and their views on business conditions over the next few months. “There’s nervousness about earnings season and the CPI report, but I think the market has a sense as to what CPI is going to bring this week,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

As the stock market closed on Monday, the Dow Jones Index (US30) was down 0.52% and the S&P 500 Index (US500) lost 1.15%. Yesterday the Technology Index NASDAQ (US100) decreased by 2.26%. At the end of the day all three indices were on the plus side.

US consumers see inflation continuing to rise in the coming year but expect a more moderate pace over the long term, indicating that inflation expectations remain reasonably resilient, a New York Fed survey showed on Monday. The Fed is expected to raise rates by 75 basis points at its July 26-27 meeting. Fed futures traders are predicting a prime rate hike to 3.50% by March.

Shares of Twitter Inc fell nearly 10% on Monday as the company prepared to sue Ilon Musk for his attempted rejection of a $44 billion private offering.

Stock markets in Europe mostly fell on Monday. Germany’s DAX (DE30) decreased by 1.40%, France’s CAC 40 (FR 40) lost 0.61%, Spain’s IBEX 35 (ES35) decreased by 0.43%, and only the British FTSE 100 (UK100) closed yesterday in the plus 0.01%.

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The euro fell to a 20-year low and came close to parity with the dollar. One of the main problems the ECB is dealing with right now is the so-called “fragmentation” problem. It is when bonding yields of Europe’s northern countries are falling, and yields of peripheral countries are rising. The concern is that tighter monetary policy will increase this difference, leading to an unequal financial position in the general market. This split in views could lead to a stronger market reaction to the ECB’s actions. Most recently, Austrian MPC member Holtzman called for the ECB to raise the rate by 125 points over the next two meetings: 30 points in July and 75 points in September.

The largest pipeline, Nord Stream 1, which transports Russian gas to Germany, began its annual maintenance on Monday, and supplies are expected to be halted for ten days.

On the oil market, the situation remains uncertain. On the one hand, supply shortages on the back of high summer demand are pushing oil prices up. On the other hand, the Fed is aggressively raising interest rates, which leads to an increase in the dollar index. Dollar-denominated goods, including oil, are not usually in demand from foreign buyers when the US currency is rising. As a result, oil prices are very volatile right now.

Yesterday, Asian markets were mostly down. Japan’s Nikkei 225 (JP225) increased by 1.11%, Hong Kong’s Hang Seng (HK50) decreased by 2.77%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 1.14%. Asian stocks are also under pressure on the prospect of further monetary tightening by central banks and the renewed outbreak of COVID-19 in China.

Sri Lanka’s parliament will elect a new president on July 20, its speaker said on Monday. During the meeting of party leaders, it is necessary to ensure the formation of a new all-party government according to the constitution.

S&P 500 (F) (US500) 3,854.47 −44.91 (−1.15%)

Dow Jones (US30) 31,175.52 −162.63 (−0.52%)

DAX (DE40) 12,832.44 −182.79 (−1.40%)

FTSE 100 (UK100) 7,196.59 +0.35 (+0.01%)

USD Index 108.25 +1.24 (+1.16%)

Important events for today:
  • – Japan Producer Price Index (m/m) at 02:50 (GMT+3);
  • – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
  • – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
  • – Eurozone EU Economic Forecasts, tentative;
  • – UK BoE Gov Bailey 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.


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