European stock markets opened mostly in the red. The Paris stock market lost +2%, the Milan stock market and the benchmark Eurostoxx 50 index 2.3%. London also fell 1.77% after the publication of a 0.3% drop in British Gross Domestic Product (GDP) in April for the second consecutive month.
US inflation reached a new high in May, at 8.6% year-on-year, well above analysts’ expectations. The increase in consumer prices accelerated again last month. Inflation was also boosted last month by higher prices for other goods such as food, which soared after Russia’s war with Ukraine. China’s zero COVID-19 policy, which has dislocated supply chains, is also seen as keeping goods prices strong.
Asia operated in the same vein. The Tokyo stock market closed sharply down 3.01% and the yen fell to its lowest level against the dollar, which was trading at its lowest point since 1998. Shanghai lost 0.89% and Hong Kong fell 3 .07% in the last operations.
The Monetary Committee of the US Central Bank (Fed) will meet on Tuesday and Wednesday, and markets are already expecting a 50 basis point adjustment of key interest rates, after a similar increase last month. But with prices rebounding, more and more analysts are wondering if the central bank will not tighten the screw further by triggering a rate hike of 75 points, an extremely rare move in recent Fed history.
A rise of half a percentage point is expected in July, and there is a good chance of another similar increase in September, but that is not so clear.
In commodity markets, fears about economic growth are also giving oil prices a slight reprieve, which is back below $120 a barrel. The main driver of these falls is the fear of lower demand from China, the world’s largest importer of black gold, given the rebound in Covid-19 cases in Beijing and the massive tests that will be carried out in the Chinese capital in the coming days.
US West Texas a barrel fell 1.52% to $118.83, while benchmark European Brent oil futures fell 1.51% to $120.17.
Source: Ambito
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