The international market was changing last week. The US Consumer Price Index (CPI) in May exceeded expectations and caused market fluctuations. Many countries' central banks announced that interest rate hikes , and global energy prices were running at high levels.
U.S. stocks fell sharply, with the Dow Jones Industrial Average falling 4.58% weekly, the 10th week of decline in the past 11 weeks. S&P 500 fell 5.05%, while the Nasdaq fell 5.6%, both of which were the 9th week declines in the past 10 weeks. The three major European stock indexes fell across the board, the UK's FTSE 100 index fell 2.86% weekly, Germany's DAX30 index fell 4.83% weekly, France's CAC40 index fell 4.60% weekly,
There are many highlights this week, Federal Reserve will announce interest rate decisions and update the quarterly economic outlook (SEP). At the same time, the United States will announce the May Producer Price Index (PPI) this week, which is expected to continue to run at a high level. In addition, the monthly performance of retail sales also attracted attention. The market expects that under the pressure of inflation, the Bank of England may push interest rates to a new high since 2009 this week, and Switzerland and the Bank of Japan are expected to remain calm. The U.S. midterm election primary is underway, and the Republican Party will launch an attack on the control of Congress.
The Federal Reserve faces a difficult choice
As energy and food prices soared, the United States' CPI increased by 8.6% year-on-year in May, surpassing the data peak since 1981, which was just set in March this year. High inflationary pressure is putting pressure on the Fed, and market speculation about a "suspended" rate hike in September has been shaken.
The Federal Reserve will usher in a interest rate meeting this week. is currently generally expected to raise interest rates by 50 basis points and send a signal of further tightening of policies. Interest rate futures pricing shows that the Federal Reserve will raise interest rates by 50 basis points in the June, July and September meetings. Boosted by this, the dollar index has approached its high this year, and its subsequent trend will be related to the latest statement of Federal Reserve Chairman Powell and the " dot chart ".
For the Fed, tightening of policies faces pressure from an economic slowdown. Several indicators show that the expansion of manufacturing and service industries in the United States is slowing down, the labor recovery has slowed down, and consumers are being squeezed by rising cost of living. Many technology companies have slowed down the pace of recruitment, and the policy space for achieving a soft landing has become limited. In terms of
data, will release PPI this week. Considering the supply chain bottlenecks and the continued rise in international energy prices, it is expected that the PPI growth rate will remain in double digits last month, increasing the pressure on enterprises to guide costs downstream. 5 retail sales data also attracted widespread attention to . Against the backdrop of the continued price increase of goods and services, the market expects the latest retail rate in the United States to slow down to 0.2%. In addition, the monthly rate of new house construction and construction permits in May, , New York Fed , Philadelphia Fed Manufacturing Index and other indicators are also worthy of attention from investors. In terms of
financial report, key companies that will announce their performance this week include Oracle , Adobe and Kroger.
The 2022 US midterm elections are approaching. On Tuesday, the US will hold a congressional primary election, and the Republican Party will continue to launch strong challenges to the Democrats for the control of the Congress.
Crude oil and gold
International oil prices rose for the seventh consecutive week last week and hit a three-month high. Demand for fuel in various countries continues to push up energy prices. WTI crude oil contract rose 1.51% weekly to $120.67 per barrel, and Brent crude oil contract rose 1.91% weekly to $122.01 per barrel.
Data released by the U.S. Energy Information Administration (EIA) shows that gasoline inventory has fallen further over the past week, indicating that demand is continuing to increase as the summer driving season fully unfolds. Warren Patterson, head of strategy for commodities , said in a report that slightly above 218 million barrels of gasoline stocks are usually levels seen at the end of the driving season and should not appear at the beginning.
Citibank and Barclays raised their price forecasts for 2022 and 2023 due to tight supply in Russia and delayed return of Iranian oil. Citi analysts said the reconfiguration of funds flowing to Asia could mean that Russia's output and export declines will be in the range of 1 million to 1.5 million barrels per day. Barclays expects Russian oil production to fall by 1.5 million barrels per day by the end of 2022.
International gold price reversal in the late trading and closed slightly higher, with US stocks falling sharply, and investors turning to risk aversion. The COMEX gold futures contract for August delivery on the New York Mercantile Exchange rose 1.41% weekly to $1,871.50 per ounce.
World Gold Council (WGC) released its annual central bank investigation report. The results show that one in four central banks surveyed hope to increase their holdings of gold within one year. The report said that the plan to increase holdings of gold by several central banks is mainly due to growing concerns about the potential global financial crisis. In addition, the expected changes in the international monetary system and the risks of the reserve currency economy are also the main factors they consider. The central bank's gold demand may remain strong in the face of a more challenging economic and geopolitical environment, as the characteristics of gold's safe-haven and hedging inflation help strengthen central bank confidence in gold.
Signs of accelerated price pressure prompted investors to adjust their pricing of the Federal Reserve policy. Naeem Aslam, chief market analyst at AvaTrade, said that the US dollar and Treasury bonds will be more attractive in comparison. "On the one hand, gold plays a role in hedging inflation, but at the same time, the main negative factor is the US dollar index. The higher the inflation, it means that the Federal Reserve's monetary policy is the tougher, which is the focus of market attention."
It is expected that the Bank of England will continue to raise interest rates
Last week, the European Central Bank held a meeting on interest rates and decided to keep the three major interest rates unchanged. The ECB said it has decided to take further measures to normalize monetary policy based on the latest assessment. Currently, the market expects that the ECB will raise interest rates by 150 basis points this year.
European Central Bank President Lagarde (Christine Lagarde) reiterated the statement's wording on a possible sharp rate hike in September at a press conference, saying that if the medium-term inflation expectations remain unchanged or worsen, the ECB will raise interest rates by half a percentage point. As for July, she believes that given the high economic uncertainty, it is necessary to start the cycle step by step. After September, "gradual but continuous further rate hikes will be appropriate."
This week, the Bank of England will announce its interest rate decision, with the market expecting a 25 basis point rate hike to 1.25%, while the probability of a 50 basis point rate hike is close to 1/3.
This will be the fifth rate hike since December last year, and the Bank of England may continue to raise rates in the coming months as inflation is expected to reach double digits later this year. However, the risks facing the economy cannot be ignored. At last month's meeting, the Bank of England had issued a red alert on the risk of recession. Some officials even support the "suspension" of rate hikes amid high inflation. Since then, concerns have been confirmed by new data, and business surveys show a sharp slowdown in the economy. Deutsche Bank analyst Sanjay Raja said there is no unanimous decision for the vote. Compared with the last meeting, the Monetary Policy Committee will be more divided. At least 3 members of the committee seek a 50 basis point rate hike, and 1-2 members of the hope that the bank interest rate will remain unchanged.
This week's highlights
