Weekly Market Wrap 17/06/2022

Global stocks fell sharply as the Bank of England, US Fed and Swiss National Bank rose interest rates this week. The Bank of Japan bucked the trend by keeping ultra-low interest rate targets unchanged, commenting that it will keep a close eye on Yen weakness. Recessionary fears continue to grow although President Biden has said it is “not inevitable”.

US Markets 

The S&P 500 is currently ending the week down 5.92% at 3,670 and the NASDAQ is down 5.59% at 11,172. US markets suffered as the Fed raised interest rates by 0.75%, the largest increase since 1994. Fed Chair Jerome Powell did offer some initial commentary that the Fed will adjust where needed but the index resumed its downward trend on Thursday. Recession fears are growing as officials outlined a faster pace of rate hikes and global central banks followed suit. 

UK Market   

The UK market also fell strongly this week as the Bank of England raised interest rates by 0.25% as it warned that inflation would hit 11% this year. Tesco reported that customer habits were shifting markedly, switching to purchasing cheaper goods, in the wake of the growing cost-of-living crisis. 

European Markets   

The Euro Stoxx 50 fell 7.79% to 3,450, the DAX closed down 7.60% at 13,107 whilst the CAC 40 was down 8.01% to 5,915. The Swiss National Bank surprised markets with its first rate rise since before the global financial crisis. 

The European Union vowed to fight financial fragmentation and confirmed that Ukraine and Moldova can become candidates to join the EU, a dramatic policy shift following Russia’s invasion of Ukraine. 

Fixed Income  

Yields on the US 10-Year Treasury rose strongly to 3.24% in the wake of central bank rate rises, Italian bonds rallied on Friday following steep falls in the week as the European Central Bank committed to fight financial fragmentation of the block. 

Commodities 

Brent Crude retreated by 3.94% to $117 per barrel this week. Russia stated capacity of its Nord Stream 1 pipeline would be cut by around 60%, dramatically reducing European gas supply. The US government is somewhat hamstrung in its efforts to increase sanctions on the Russian government by petrol prices rising above $5 a gallon for the first time. 

The Week Ahead  

Monday – PBoC Interest Rate Decision

Tuesday –  

Wednesday –UK CPI

Thursday – EU Leaders’ Summit, UK PMI, German PMI, US Bank Stress Test results

Friday –EU Leaders’ Summit, UK Retail Sales

*Price changes as of last week’s close unless stated otherwise.