Stock indices continue to decline amid the growing probability of a recession

The Fed and other global central banks are trying to suppress inflation by aggressively raising interest rates. Major US stock indexes fell for the third week in a row due to concerns about the growing recession probability. At the close of the stock market on Friday, the Dow Jones Index (US30) decreased by 0.13% (-4.03% for the week), and the S&P 500 Index (US500) added 0.22% (-4.25% for the week). The Technology Index NASDAQ (US100) gained 1.43% (-1.72% for the week). All three indices were down on the week.

Over the weekend, Fed representatives Waller and Kashkari made several statements to the media stating they were prepared to support a 0.75% interest rate hike at the next Committee meeting as well. At the same time, Federal Reserve Bank of Cleveland President Loretta J. Mester said it would take two years for inflation to fall to the Central Bank's 2% target. However, Mester added that she does not forecast a recession despite slowing growth. "We have a slowdown in growth to a little below trend, and the unemployment rate is going up a little bit. And that's fine. We want to see some slowdown in demand to bring it in line with supply," Mester added.

On Saturday, US President Joe Biden said he is considering lifting some tariffs on China and possibly suspending the federal gas tax to fight inflation.

Stock markets in Europe traded without a single dynamic on Friday. German DAX (DE30) gained 0.67% (-3.23% for the week), French CAC 40 (FR 40) decreased by 0.06% (-3.37% for the week), Spanish IBEX 35 (ES35) gained 0.84% (-1.91% for the week), British FTSE 100 (UK100) lost 0.41% (-4.12% for the week).

Today, ECB President Christine Lagarde will appear before the European Parliament in Brussels, and she will probably be questioned in detail about the progress of the new instrument to combat the crisis. The ECB is drawing up plans for a new procurement scheme to combat "fragmentation," or the widening gap between the cost of borrowing paid by Germany and the larger debtors in the eurozone's periphery, such as Italy and Spain, and Greece. Government borrowing costs have risen sharply in the Eurozone periphery after the ECB announced plans earlier this month to raise interest rates to fight inflation.

Howard Davis, deputy governor of the Bank of England from 1995 to 1997, said the Central Bank of England had to raise rates by more than 0.25 percent to lend credibility to its medium-term approach, which could potentially ease some pressure on the sterling.

The EU Commission recommends that Ukraine be granted EU candidate status.

Oil prices fell on Friday and continued to decline at the market's opening on Monday as concerns about slowing global economic growth and fuel demand offset concerns about supply cuts. The impact was partly mitigated by the release of strategic oil reserves led by the United States and production increases by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+. However, this was not enough amid the strong demand for the fuel. Oil from Russia, the world's second-largest exporter, remains out of reach for most countries because of Western sanctions over the war in Ukraine.

Asian markets traded lower last week. Japan's Nikkei 225 (JP225) decreased by 5.14% for the week, Hong Kong's Hang Seng (HK50) lost 0.41% for the week, and Australia's S&P/ASX 200 (AU200) was down by 7.76% for the week.

At the commodities market, lumber futures showed the biggest gain over the week (+5.36%). Futures on natural gas (-20.85%), cotton (-18.59%), WTI oil (-9.77%), gasoline (-8.07%), Brent oil (-6.88%), orange juice (-6.86%), copper (-6.59%), palladium (-5.85%), platinum (-4.3%), and wheat (-3.53%) showed the biggest drop.

Main market quotes:

S&P 500 (F) (US500) 3,674.84 +8.07 (+0.22%)

Dow Jones (US30) 29,888.78 −38.29 (−0.13%)

DAX (DE40) 13,126.26 +87.77 (+0.67%)

FTSE 100 (UK100) 7,016.25 −28.73 (−0.41%)

USD Index 104.65 +1.02 (+0.98%)

• – China PBoC Loan Prime Rate (m/m) at 04:15 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 16:00 (GMT+3);
• – US FOMC Bullard Speaks at 19:45 (GMT+3).

by JustMarkets, 2022.06.20

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.