With rising inflation, central banks tightening, and an unlikely soft landing, investors are in a state of stagnation, not sure what the future holds.
- Forecasters’ blunder
- Reduced virtual volatility?
- Cranky Commodities
- The ECB is on the rise.
In the US, the S&P 500, Nasdaq and Dow Jones are down by about 14%, 23% and 23% YTD, respectively.
In Europe, the Stoxx 600, DAX, CAC40, IBEX35, FTSE MIB and FTSE are down by 10.5%,10%,11%,0.5%,12.5% and 1.5% YTD respectively.
Globally, the MSCI World Index is down by over 13.5% YTD, and Bitcoin is down by about 35% YTD
Inflation On The Rise
With inflation at 8.1 per cent in May 2022, the ECB stated that it would raise interest rates by 25 basis points in July. It plans to increase the rates again in September, perhaps by a larger margin.
The ECB’s bond-buying program will stop on July 1st. According to the most recent prediction, inflation is expected to be 6.8% in 2022, 3.5% in 2023, and 2.1% in 2024.
It’s hoped that lower energy costs, fewer pandemic-related supply disruptions, and higher interest rates will help to reduce inflation.
Bonds rose in response to rising inflation and the ECB’s stricter stance, while the Euro fell.
On Tuesday, the World Bank cut its economic outlook predictions for 2022 by about a third, to 2.9 %, stressing that several countries are already in an economic downturn.
World Bank President David Malpass Global noted that growth could slow to 2.1 % in 2022 and 1.5 % in 2023, bringing per capita growth close to zero.
With the crisis intensifying, the OECD reduced their overall growth prediction to 3% from 4.5 % in January; it anticipates only 2.8 % growth in 2023 (down from 3.2 % in January).
Some commodity stocks, such as First Majestic Silver, Agnico Eagle Mines, and Southern Copper Core, have been hit by Chinese lockdowns.
Additionally, rising prices and geopolitics-fueled run to the safe-haven US dollar. However, there is increasing hope that some commodities, such as stainless steel, might see a surge in sales as new initiatives, especially in the oil and gas sector, materialize.
It will be excellent news for significant stainless steel players like Acerinox, which is rumored to be in talks to form a strategic alliance with Aperam SA, a stainless steel maker split out from ArcelorMittal SA.
Is it Possible to Stabilize Stable Coins?
A proposed law in the US Senate will alter crypto regulations, including sanctions enforcement, stable coin monitoring, and energy consumption.
While the law is unlikely to pass before the November elections, this might help pave the way for future discussions. Issuers of stable coins must keep 100% reserves and openly identify the assets that support their tokens.
This comes amid growing pressure from the US Securities and Exchange Commission (SEC), which also demands institutions storing virtual currencies retain equity against them; this may pretty much make holding crypto for clients prohibitively expensive.
The law of unintended consequences may leave Bitcoin and cryptocurrency ETFs like Volt crypto industry revolution and tech ETF and Bitwise Crypto Industry ETF with a negative outcome.
Essential Data To Watch Out for This Week
In Europe, the German Harmonized Index of Consumer Prices will be released on Tuesday 13th June 2022, followed by EU industrial production statistics on Wednesday.
In the United States, the CPI and the Michigan Consumer Sentiment Index will be released on Friday and the PPI on Tuesday.
Retail Sales will be released on Wednesday, and the Fed will announce its interest rate decision and macroeconomic forecasts on Wednesday.
Investors are bracing themselves for more gains as demand stays robust in spite of a slight increase in unemployment claims this week.
According to IMF First Deputy Managing Director Gita Gopinath, US inflation may continue above targets for a long period of time, as well as the risk that rates may rise considerably more quickly.
This mirrored US Treasury Secretary and former Fed Chair Janet Yellen’s remarks to the Senate Finance Committee. She admitted that her previous year’s predictions were wrong and that rising prices will likely continue this year.
In the United Kingdom, the claimant count, unemployment, and average earnings data will be released on Tuesday, followed by the Bank of England’s interest rate announcement on Thursday.
Traders are speculating that the Bank of England will raise rates by 50 basis points after inflation topped 9% in April. Energy prices are rising in the UK, and the administration is also planning to compensate people, which could fuel inflation.
The Bank of England has little power over supply difficulties; the UK has faced supply limits due to the pandemic and is currently adjusting to trade restrictions imposed by Brexit.
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