On Monday, the US dollar fell slightly from a 20-year high hit earlier this month. It followed positive US economic data that eased expectations of an aggressive rate hike by the Federal Reserve. At the same time, stock indices also showed weakness, but usually, when the dollar index declines, indices rise.
At the close of trading on Monday, the Dow Jones index (US30) decreased by 0.20% and the S&P 500 index (US500) lost 0.30%. The technology index NASDAQ (US100) fell by 0.72% yesterday. At the end of the day, all three indices were down.
Goldman Sachs says the US rate market is underestimating the risk of recession. While market expectations for the Fed Funds rate have declined in recent weeks to levels with "limited downside potential for early 2023, federal funds pricing for 2024 likely underestimates recession risk," strategists said. According to expectations implied by interest rate swaps, the Fed policy rate will peak at 3.60% by March 2023, up 2% from current levels.
Equity markets in Europe traded flat yesterday. German DAX (DE30) gained by 0.52%, French CAC 40 (FR 40) fell by 0.43%, Spanish IBEX 35 (ES35) lost 0.02%, British FTSE 100 (UK100) closed on Monday in plus 0.69%.
On Monday, Prime Minister Boris Johnson said that Britain may introduce unilateral changes to Northern Ireland's trade rules after Brexit this year. The EU calls the move illegal.
Russia's first major international default in more than a century became a fact on Monday. It was followed by months of coordinated Western sanctions that left Moscow with cash but denied access to an international financial network.
Oil jumped by 2% yesterday on rumors that a G7 decision against Russia would lead to further supply cuts. The Saudi-led OPEC+ alliance also cut its projected 2022 oil market surplus to 1 million barrels per day from a previous estimate of 1.4 million. Some oil investors are hesitant to open large positions after the US Energy Information Administration said the weekly inventory report would be delayed for the second week in a row because of server problems. The EIA weekly oil report was not released on June 24 and will likely not be released on June 29.
G7 leaders warned that Russian President Vladimir Putin would be held accountable for committing the heinous and deadly attack on a crowded shopping mall in Ukraine. According to President Vladimir Zelenski, at least 1,000 shoppers were in the mall when a Russian missile hit it, making it "one of the most devastating terrorist attacks in European history." At least 18 people were killed and more than 40 injured. The number of casualties is difficult to determine as rescuers continue to search among the rubble. With a high probability, Russia will be declared a sponsor of terrorism in the near future.
Asian markets were trading higher on Monday. Japan's Nikkei 225 (JP225) gained 1.43%, Hong Kong's Hang Seng (HK50) added 2.35% for the day, and Australia's S&P/ASX 200 (AU200) jumped by 1.94%.
Earlier this month, the Bank of Japan may have suffered a 600 billion yen ($4.4 billion) unrealized loss on Japanese government bonds as the widening gap between domestic and foreign monetary policy led to rising yields and prices. Despite this, the Bank of Japan continues to keep its monetary policy soft as policymakers attribute rising inflation to rising energy and commodity prices. More and more analysts are starting to think that at some point, the Bank of Japan will make currency intervention, as the yen's weakness is taking a heavy toll on the Japanese economy. Both BOJ Governor Kuroda and Prime Minister of Japan Kishida acknowledge this point.
S&P 500 (F) (US500) 3,900.11 −11.63 (−0.30%)
Dow Jones (US30) 31,438.26 −62.42 (−0.20%)
DAX (DE40) 13,186.07 +67.94 (+0.52%)
FTSE 100 (UK100) 7,258.32 +49.51 (+0.69%)
USD Index 103.98 -0.21 (-0.20%)
- – US FOMC Member Williams Speaks (m/m) at 01:30 (GMT+3);
- – ECB President Lagarde Speaks at 11:00 (GMT+3);
- – US CB Consumer Confidence (m/m) at 17:00 (GMT+3).
by , 2022.06.28
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