06 Jul

The energy crisis is getting worse in Europe. Investors awaiting FOMC minutes

July 6, 2022

By JustForex

Yesterday, the dollar index showed an impressive rally and added almost 1.4% during the day, setting a 20-year record. Analysts attribute this growth to the fact that the FOMC minutes will be released today, indicating that the Fed will again raise the interest rate by 0.75% at its next meeting. Investors remain concerned about the recession caused by monetary tightening, despite possibly reducing some US tariffs on Chinese goods. The looming energy crisis in Europe amid Russia’s invasion of Ukraine and threats to corporate earnings are also at the forefront of investor concerns.

As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 0.42%, and the S&P 500 Index (US500) added 0.16%. The NASDAQ Technology Index (US100) jumped by 1.75% on Tuesday.

Stock markets in Europe traded lower yesterday. German DAX (DE30) decreased by 2.91%, French CAC 40 (FR40) lost 2.68%, Spanish IBEX 35 (ES35) fell by 2.48%, British FTSE 100 (UK100) was down by 2.86%.

Joachim Nagel, head of Germany’s Bundesbank, lashed out at the ECB’s plans to protect heavily indebted countries from rising borrowing rates. It has really hurt investor sentiment ahead of next week’s ECB interest rate meeting. The risk of Europe and Britain sliding into recession has risen sharply since the 17% jump in natural gas prices in Europe, which looks set to cause even more inflation.

In addition to the economic crisis, a political crisis is brewing in Britain. Finance Minister Rishi Sunak resigned just minutes after the health minister resigned, saying he had lost confidence in Johnson’s ability to govern in the national interest.

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Oil prices fell below $100 a barrel yesterday. Oil prices lost more than $10 a barrel in just one day. The dollar’s jump to a two-decade high on expectations of an aggressive Fed rate hike stimulated oil sales, which tend to attract less buying by non-US companies when the dollar value rises. Growing recession fears are weighing on the outlook for oil demand, despite concerns about supply constraints and the prospect of more US jobs in June.

Gold prices fell sharply yesterday. The US Treasury yields jumped to 2.8% amid a surge in the dollar index. Gold and silver are inversely correlated to government bond yields and currently have no fundamental support for gains.

Asian markets closed higher yesterday. Japan’s Nikkei 225 (JP225) gained 1.03%, Hong Kong’s Hang Seng (HK50) added 0.10%, and Australia’s S&P/ASX 200 (AU200) was up by 0.25% on Tuesday.

Shanghai has begun a massive COVID test in nine districts after cases were detected over the past two days, heightening fears of a new lockdown.

S&P 500 (F) (US500) 3,831.47 +6.14 (+0.16%)

Dow Jones (US30) 30,967.82 −129.44 (−0.42%)

DAX (DE40) 12,401.20 −372.18 (−2.91%)

FTSE 100 (UK100) 7,025.47 −207.18 (−2.86%)

USD Index 106.49 +1.36 (+1.29%)

Important events for today:
  • – UK Construction PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
  • – Eurozone EU Economic Forecasts (m/m) at 12:00 (GMT+3);
  • – US FOMC Member Williams Speaks at 16:00 (GMT+3);
  • – UK ISM Services PMI (m/m) at 17:00 (GMT+3);
  • – US JOLTs Job Openings (m/m) at 17:00 (GMT+3);
  • – US FOMC Meeting Minutes at 21:00 (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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