Eurozone, Germany, France, UK, Italy Manufacturing PMI;
Eurozone, Italy Provisional CPI; UK Monetary & Financial
Statistics, BOE Effective Interest Rates, Money and Credit; updates
from Sodexo, Ryanair
Further steep losses for European stocks are likely on Friday as
recession fears continue to dominate financial markets. In Asia,
major benchmarks mostly tracked Wall Street lower; bonds continued
to rally, the dollar and oil gained; and precious and base metals
extended their losses.
European shares face further hefty losses on Friday as fears of
a global recession grow.
U.S. stock futures also were down after the major indexes on
Wall Street closed lower on Thursday, capping the S&P 500's
worst first half in more than 50 years.
The same overarching issues, like tenacious inflation, rising
interest rates, and battered consumer sentiment, continue to
command markets' attention-all amid growing discussion of the
likelihood of a recession.
In Asia, sentiment among Japan's large manufacturers
deteriorated in the three months to June, reflecting concerns over
lockdown in Shanghai and prolonged supply shortages, while a
private gauge measuring China's factory activity rebounded to its
highest level in a year, pointing in the same direction as the
official gauge to reflect an economic recovery from the impact
Markets are pricing an 83-basis point cut in the fed-funds rate
next year, said Piper Sandler.
"The extent of market-expected rate cuts has been larger than it
is today on only two other occasions--December 5 and December 11,
2007, at the onset of the Great Financial Crisis." It added that it
doesn't mean a recession as deep is to be expected.
"The reason why the market expects a sharp Fed retracement is
because at the end of the year, the federal funds rate is likely to
be well above neutral, whereas in 2007 it was actually well below
S&P said sharp monetary tightening is slowing global growth,
with "inflation, energy security, and geopolitical uncertainty
being the chief risks."
Continuing supply-side price pressures in food and energy
markets may fuel inflation and the ongoing Russia-Ukraine conflict
could further undermine global trade and economic growth.
S&P also said "as economic growth slows and financing
conditions become tighter, we see an increased risk that sharply
higher interest rates, persistent inflation, and renewed consumer
caution could push the US, and potentially Europe, into a
recession, most likely in 2023."
The dollar was slightly firmer against its major peers in a
mostly cautious Asian session, as investors continued to weigh the
path of Fed rate hikes and possible recession risks.
The euro remains sharply weaker against the dollar this
year--it's near $1.05, compared with around $1.14 at the beginning
of the year and will continue to slide if the ECB doesn't raise
rates more aggressively, according to some analysts.
"The most negative news continues to emanate from Europe, where
inflation is running hotter than in the U.S., since the euro has
declined 8% against the dollar this year," said Navellier &
"Obviously, like the Bank of Japan, if the ECB continues to
severely lag the Fed in hiking key interest rates, the euro will
remain weak and likely reach parity with the dollar in the upcoming
Investors continued to buy government bonds on Friday, with the
yield on the benchmark 10-year Treasury note remaining below
After mounting one of its fastest increases in history to start
2022, the 10-year yield has in recent weeks retreated from an
end-of-day high of 3.482% reached on June 14, a reflection of
traders' dimming views about the economy's path.
"The most notable development during the final full trading
session of the week was 10-year yields' move below 3% for the first
time since June 10 as buying interest to conclude the half pushed
rates across the curve lower," said BMO Capital Markets.
"The belly of the curve was the outperformer, as 5-year rates
probed 3% as well, and the breakdown of the price action resonates
with the move in breakevens and the implications for the Fed. The
lagged influence of monetary policy means that any tightening
executed this year holds little bearing on 2022's realized
Fitch has revised its outlook on the global sovereign credit
sector to neutral from improving, adding "global sovereign credit
conditions have deteriorated since the start of the year."
According to Fitch, "fiscal recoveries that were evident in 2021
and previously were forecast to extend into 2022 have become less
Fitch said the Russia-Ukraine conflict and subsequent sanctions
have "wide-ranging and far-reaching effects, altering global
security considerations, interrupting trade and capital flows, and
contributing to weaker economic growth and higher inflation."
None of these issues will be resolved this year, according to
Oil futures were slightly higher in Asia, supported by signs of
tight supply as OPEC+ struggles to raise its production levels,
with limited spare capacity, said ANZ.
ANZ added that a worsening economic outlook is clouding demand
expectations and could limit the price gains. Also, U.S. motorists
are likely planning fewer-than-usual trips during the country's
peak driving season, which could hurt gasoline, and hence oil
There's likely to be further tightness in spare production
capacity and this tightness "makes the system fragile to any
further marginal losses, " said Neuberger Berman. Under these
conditions, absent any recession, "we expect markets to continue to
offer a scarcity premium."
Oil futures ended lower on Thursday and posted a loss for the
month, but logged strong first-half gains.
Gold futures extended losses in Asia as a stronger dollar and
expectations for aggressive action by the Fed continued to diminish
the precious metal's luster.
Bullion settled lower for a fourth day in a row on Thursday,
sending prices down by more than 2% for the month to their lowest
finish since February. Silver prices also softened, down a third
straight day and ending the month with a loss.
Commerzbank said while gold had risen in response to the earlier
downward revisions in U.S. economic data, a pickup in dollar
strength has more than erased those gains, adding that upcoming
European inflation figures will be in focus on Friday.
Aluminum and copper prices were lower as concerns over the
global economic mount.
Industrial metals ended the second quarter on a negative note,
with all major metals settling in the red, said ING. Copper fell
20%, with aluminum down 30%, making it the worst performer among
LME base metals.
Iron ore futures were down almost 4%.
The steel industry's PMI in June plunged to its lowest level
since the financial crisis of 2008, said ANZ Research. New steel
orders sank in June, although steel inventories showed only a
marginal drop during the month, despite production falling.
Fitch said iron ore prices may moderate in the second half as
steel inventories have been building up.
"The longer it takes for construction and manufacturing sectors
in China to reopen, the more likely it is that steel margins will
come under pressure and some capacity is curtailed, putting
pressure on iron ore prices."
TODAY'S TOP HEADLINES
China Manufacturing Output Rebounds as Covid Restrictions
A private gauge measuring China's factory activity rebounded to
its highest level in a year, pointing in the same direction as the
official gauge to reflect an economic recovery from the impact
The Caixin China purchasing managers index rose to 51.7 in June,
up from 48.1 in May, ending a three-month streak of contraction,
according to data released Friday by Caixin Media Co. and S&P
Global. The 50 mark separates expansion from contraction.
Japan's Large Manufacturers Sentiment Deteriorates, Tankan
TOKYO-Sentiment among Japan's large manufacturers deteriorated
in the three months to June, reflecting concerns over lockdown in
Shanghai and prolonged supply shortages.
The main index for sentiment among large manufacturers was +9,
compared with +14 in the March survey, according to the Bank of
Japan's quarterly tankan corporate survey released Friday. The
reading marked the second straight quarter of lower sentiment and
was below a projection for +12 from a poll of economists by data
S&P 500 Posts Worst First Half of Year Since 1970
U.S. stocks retreated on the final day of a brutal quarter for
markets, weighed down by losses among shares of everything from
banks to oil producers.
Thursday's trading was volatile. Major indexes fell sharply in
morning trading, pared losses in the following hours, and then fell
again late in the session.
Most Countries Lack Crypto Information-Sharing Laws, Watchdog
Most countries lack "travel rule" laws that could help prevent
illicit use of cryptocurrency by criminals and terrorists, a global
anti-money-laundering watchdog said Thursday.
Shiploads of Russian Grain and Good Weather Temper Wheat
Fine farm weather and a rush of Russian grain ships through the
Black Sea have taken the sting out of global wheat prices, a
welcome sign for vulnerable countries struggling with surging food
The right mix of sun and rain in the U.S., Europe and Australia
has raised hopes that end-of-summer harvests will be plentiful.
That should help balance the sizable quantities of Ukrainian wheat
stranded in the country by fighting and a Russian naval
Biden Backs F-16 Sales to Turkey Amid Deal to Expand NATO
President Biden affirmed his support for the sale of a new fleet
of F-16 jet fighters to Turkey on Thursday, two days after the
Turkish president dropped his threatened veto of Sweden and
Finland's membership in the North Atlantic Treaty Organization.
"We should sell them the F-16 jets and modernize those jets as
well. It's not in our interest not to do that," Mr. Biden said at a
news conference after the NATO leaders' summit in Madrid.
New Zealand, European Union Settle on Free-Trade Agreement
SYDNEY-New Zealand has concluded negotiations for a free-trade
deal with the European Union, eliminating tariffs on exports
including wine, manuka honey, apples and most seafood.
The deal provides duty-free access on 97% of New Zealand's
existing exports to its fourth-largest trading partner after China,
Australia and the U.S.
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Expected Major Events for Friday
00:01/IRL: Jun Ireland Manufacturing PMI
07:00/POL: Jun Poland Manufacturing PMI
07:00/NED: Jun Netherlands Manufacturing PMI
07:00/TUR: Jun Turkey Manufacturing PMI
07:15/SPN: Jun Spain Manufacturing PMI
07:30/CZE: Jun Czech Republic Manufacturing PMI
07:30/SWI: Jun procure.ch Purchasing Managers' Index
07:45/ITA: Jun Italy Manufacturing PMI
07:50/FRA: Jun France Manufacturing PMI
07:55/GER: Jun Germany Manufacturing PMI
08:00/EU: Jun Eurozone Manufacturing PMI
08:00/GRE: Jun Greece Manufacturing PMI
08:30/UK: May Monetary & Financial Statistics
08:30/UK: May Bank of England effective interest rates
08:30/UK: May Money and Credit - Lending to Individuals, Lending
to Businesses, Broad Money and Credit
08:30/UK: 4Q Postcode Lending statistics
08:30/UK: Jun S&P Global / CIPS UK Manufacturing PMI
09:00/ITA: Jun Provisional CPI
09:00/ITA: Jun Cities CPI
09:00/EU: Jun Flash Estimate euro area inflation
09:00/CYP: Apr Retail trade
09:00/DEN: Jun Danish PMI
10:00/POR: May Industrial production index
15:59/UKR: May Industrial Production
16:59/AUT: Jun Unemployment figures
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(END) Dow Jones Newswires
July 01, 2022 00:39 ET (04:39 GMT)
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