Market Update June Monday 6th 2022

Stocks withdraw from last week’s rally

Stocks relinquished a part of last week’s solid gains as investors remained to doubt whether the Federal Reserve will be able to suppress inflation without triggering a recession. Industrials shares were the standout, assisted by an increase in Boeing.

Volatility continued to maintain since its recent peak in mid-May, although cautions from JPMorgan Chase CEO Jamie Dimon that an economic “hurricane” was on the horizon due to rising interest rates and increased commodity prices appeared to unsettle some investors on Wednesday. A report Friday that Elon Musk had emailed fellow executives that Tesla may have to lay off 10% of its workforce—and that he had a “super bad feeling” about the global economy—also seemed to unnerve investors to some extent. US Markets were closed Monday in observance of Memorial Day.

On the other hand, the week’s economic data had minimal effect in promoting concerns of an imminent recession—specifically one fueled by layoffs. On Friday, the Labor Department disclosed that employers added 390,000 nonfarm jobs in May, well over consensus expectations of around 320,000.

Inflation may have come to a head, however, Fed’s course remains unclear.

Inflation signals were arguably more challenging to decode, as were remarks from Fed officials about the prospective long term implications of rate hikes – comments were watched vigilantly given the Fed’s upcoming “blackout” period ahead of the June 14‒15 policy meeting. Some belief developed that the Fed may pause rate hikes at its September meeting to assess their imprint to date on the economy, and Federal Reserve Vice Chair Lael Brainard mentioned on Thursday that financial conditions had already been firmed significantly—while caution that policymakers may still raise rates by half a percentage point in September.

Global markets

A spike in eurozone inflation data and news that the European Union will ban most Russian oil imports by the end of this year aided in driving Treasury yields up at the start of the trading week, while belligerent policy motions by the Bank of Canada brought in greater pressure to shorter-term U.S. interest rates.

European shares tumbled in low volume as the UK market closed early to commemorate Queen Elizabeth II’s 70th year on the throne. Investors remained to grasp with worries about increased inflation, lagging economic growth, the rate of central bank policy tightening, and the invasion of Ukraine seeing the FTSE 100 Index declining 0.69% through Wednesday. The STOXX Europe 600 Index ended the week 0.87% lower. Major indexes were generally weaker. Germany’s DAX Index was barely altered, CAC 40 fell 0.47% in France, and FTSE MIB lost 1.91% in Italy.

EU settles on partial restriction on Russian oil; Russia severs gas supplies to the Netherlands

European Union (EU) leaders established that at the end of the month, there would be a prohibit to all seaborne Russian oil deliveries, encompassing about two-thirds of such imports, within months. Hungary, Croatia, Slovakia, and the Czech Republic—countries that depend drastically on Russian energy supplied via pipelines—were excused temporarily from the embargo. Part of the restriction also includes a coordinated restriction with the UK on insuring ships carrying Russian oil. Earlier, the European Commission revealed a €300 billion plan to finish the EU’s reliance on Russian energy imports before 2030.

Subsequently, Russia’s state-owned energy company Gazprom closed off gas supply to the Netherlands, the fourth country to be sanctioned for declining to pay in rubles rather than dollars. Russia cut off supplies to Finland, Poland, and Bulgaria earlier in the month.