European indices are rising despite a planned interest rate hike by the ECB

June 21, 2022

The US stock market did not trade yesterday due to the banking holiday.

Stock markets in Europe traded higher yesterday. German DAX (DE30) gained 1.06%, French CAC 40 (FR40) added 0.64%, Spanish IBEX 35 (ES35) jumped by 1.72%, British FTSE 100 (UK100) was up 1.50% on Monday.

The euro increased on Monday as markets focused on the European Central Bank’s anti-fragmentation tools, ignoring the risk of political gridlock in France after President Emmanuel Macron lost an outright majority in parliamentary elections.

On Monday, ECB President Christine Lagarde confirmed plans to raise ECB interest rates twice this summer, fighting widening spreads in the cost of borrowing by various Eurozone countries.

Germany will restart its coal-fired power plants and introduce an auction scheme to cut gas consumption after Gazprom cut supplies by 60% last week. On Monday the Dutch government said it would lift restrictions on production at coal-fired power plants and activate the first phase of its energy crisis plan.

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The situation in the oil market remains the same. Oil markets are keeping oil prices above $105 a barrel. Oil prices rose yesterday as traders focused on limited supplies due to a slowdown in global economic growth. Analysts expect limited production from OPEC+ countries this summer, so market shortages will remain with demand growth.

Asian markets have been trading in positive territory since the opening. Japan’s Nikkei 225 (JP225) increased by 2.26%, Hong Kong’s Hang Seng (HK50) added 1.43%, and Australia’s S&P/ASX 200 (AU200) is up by 1.41% from the opening bell.

The People’s Bank of China left key interest rates unchanged on 1-year and 5-year loans. As the economy continues to face immense challenges, recovery is likely to be slow, with unemployment a key economic problem.

Imports from China’s Xinjiang region will be banned in the US starting today after the new rules take effect. Under the laws, firms will have to prove that imports from the region are not made using forced labor. China has repeatedly denied accusations of holding Uighurs in internment camps in Xinjiang.

Reserve Bank of Australia Governor Lowe has warned that the central bank’s board will do whatever is necessary to bring inflation under control, which he now expects to reach 7% by year’s end, doubling the bank’s 2-3% target. That’s why the RBA was forced to raise the interest rate more than expected by 50 basis points at this month’s board meeting. Economists forecast another 50-basis-point hike in July and possibly another in August, raising the rate to 1.85% by year’s end.

Main market quotes:

S&P 500 (F) (US500) 0 0 (0%)

Dow Jones (US30) 0 0 (0%)

DAX (DE40) 13,265.60 +139.34 (+1.06%)

FTSE 100 (UK100) 7,121.81 +105.56 (+1.50%)

USD Index 104.47 -0.23 (-0.22%)

Important events for today:

– Australia RBA Governor Lowe Speaks at 03:00 (GMT+3);
– Australia RBA Meeting Minutes (m/m) at 04:30 (GMT+3);
– Canada Retail Sales (m/m) at 15:30 (GMT+3);
– US Existing Home Sales (m/m) at 17:00 (GMT+3);
– US FOMC Mester Speaks at 19:00 (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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European indices are rising despite a planned interest rate hike by the ECB