Stocks continued to trade lower, with investors anticipating more volatility amid rising inflation and expectations of central bank rate hikes.
On Friday, after the worst start to the first half of the year in decades, U.S. stocks opened slightly lower. The S&P 500 index opened 4.38 points lower, down 0.12%, to 3781.00 points; the Dow Jones Industrial Average opened lower at 37.66 points. points, down 0.12%, to 30737.77 points; the Nasdaq Composite Index opened 21.90 points lower, down 0.20%, to 11006.83 points.
The S&P 500 index closed down 0.88% on Thursday, making the first half of this year the worst performance for U.S. stocks since 1970.
After recording the worst performance in the first half of the year since 2008, European stock markets continued to fall, and the decline has narrowed so far. The European Stoxx 600 Index fell by 0.50% and the Stoxx 50 Index fell by 0.40%. Retail, utilities and real estate sectors rose, while mining, technology and health care declined.
Eurostat previously released data showing that after the euro zone’s adjusted CPI rose by 8.1% year-on-year in May, it continued to rise by 8.6% year-on-year in June, continuing to hit a record high.
Since the beginning of this year, European stock markets have been affected by the tightening of monetary policies by global central banks, and European benchmark stocks have fallen by 16%. Now, strategists are looking ahead to first-half earnings reports from European companies, worried that companies may be forced to cut their future earnings forecasts as consumer spending slows and costs rise further. Kirsty Desson, investment director at
Abrdn, told the media that given that valuations have fallen across sectors, some investors may start to accumulate holdings of high-quality stocks with strong balance sheets and pricing power.
In the bond market, U.S. bonds continued to rebound, with the benchmark 10-year U.S. bond yield falling 10 basis points to 2.932%, the lowest level since early June. The yield on short-term U.S. Treasuries also fell.
German 2-year government bond yields fell 10 basis points, which may be the largest weekly drop since 2011. Germany's 10-year government bond yield fell 7.5 basis points to 1.293%. Italy's 10-year government bond yield fell 12 basis points to 3.15%, after rising 10 basis points previously.
Both stock and bond markets have been hit by capital outflows this week, reflecting market concerns about the hawkish stance of the central bank. Bank of America quoted EPFR global data as saying that in the week ended June 29, approximately US$5.8 billion was withdrawn from global equity funds, and bond redemptions were US$17 billion.
In the past six months, the scale of bond issuance by global companies exceeded the scale of all of 2020. More than 70 deals have been postponed or canceled so far this year, according to data compiled by the media.
In premarket trading, Kohl's shares fell 12% after media reports Kohl's ended sales talks with Franchise Group. Chipmaker Micron Technology fell 4.3% in premarket trading after the company unexpectedly gave a pessimistic forecast in its latest earnings report, mainly due to weak demand for mobile phones and PCs, but the company vowed to take aggressive action. , to avoid oversupply of chips.
Investors remain concerned about ongoing inflation, which has forced central banks to reverse years of loose monetary policies and accelerate interest rate hikes . The change in stance heightened concerns that slowing economic growth could lead to a recession. Central bankers around the world have said they are more concerned about controlling inflation than recession.
AXA IM Core Chief Investment Officer Chris Iggo wrote in a report to clients:
Inflation is the focus of central bank governors. The market believes that monetary tightening will be enough to reduce inflation, but to achieve this, economic growth will also have to pay a price.
Seema Shah, chief strategist at Principal Global Investors, said:
We can see that the basis for a recession is forming.
She predicts a recession early next year if the currently still strong labor market turns weak. The Russia-Ukraine conflict and uncertainty about future oil production rates make it difficult to assess the path of inflation and the prospects for recession. Rising energy prices have been a key factor driving higher inflation.
In the commodity market, international oil price benchmarks Brent crude oil and WTI crude oil prices both rose by nearly 3%. London copper prices once fell 3.5% to US$7,970.50 per ton, hitting the lowest level since the beginning of 2021, and have rebounded slightly so far. Aluminum, nickel, Singapore iron ore have all fallen.
U.S. natural gas futures surged 9.00% during the day and are currently at $5.913/million British thermal units.
The price of gold fell below the US$1,800 mark, hitting a new low since May 16. Silver Spot silver fell 4% to US$19.45 per ounce, which was the first time it fell below the US$20 mark since July 2020.
Risk assets continued to be targeted for selling on Friday, with Bitcoin continuing to trade below $20,000, having peaked at over $60,000 in November.
The U.S. dollar index rose 0.55% to 105.31, and the U.S. dollar exchange rate continued to rise. In recent months, as slowing global economic growth has prompted investors to turn to safe-haven assets, the U.S. dollar has appreciated sharply against other currencies, with the pound falling 0.9%, and the Japanese yen exchange rate falling 0.39% on the day, falling below 135 yen per U.S. dollar.
Data from the Institute for Supply Management due to be released at 10 a.m. ET are expected to show U.S. factory manufacturing activity slowed in June. This comes after U.S. household spending slowed in May.
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