Operation “shock and awe”: June 2022 will probably be remembered as the month when central banks decided to bring out the big guns to stop inflation from going up.
Within 48 hours, the U.S. Federal Reserve raised rates the most since 1994, the Swiss National Bank raised its policy interest rate for the first time in 15 years, and the European Central Bank announced new emergency tools to support the bloc’s indebted southern members as it tightens monetary policy.
In addition, the Bank of England increased borrowing costs for the fifth time since December, and its benchmark interest rates are now at their highest level since January 2009, despite the fact that the economy is in recession.
The global hawks on monetary policy are now in charge, with the notable exception of the Bank of Japan, which has stuck to its ultra-dovish policy.
As the late musician Prince used to sing, the current state of the financial markets provides a fairly accurate representation of what it sounds like when the doves cry.
At one point yesterday, the yield on Germany’s bunds jumped a shocking 20 basis points, the Swiss franc jumped a rare 2% against the euro, and many stock market indexes confirmed a bear market.
As investors worry about how quickly rising interest rates will affect the economy, the global stock market is on track to have its worst week since the pandemic meltdown in March 2020.
In relation to this, the Philadelphia Federal Reserve’s manufacturing activity index got its first negative reading since the early months of the coronavirus pandemic, and the outlook for the next six months was the worst it has been since February 2008.
In May, the number of new homes built in the U.S. fell to its lowest level in 13 months, and the number of building permits dropped sharply. This showed that the housing market was cooling because rising mortgage rates made it harder for many first-time homebuyers to afford a home.
(https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrnbyjpm/BOJ%20and%20JP%20CPI.JPG).
Friday’s key market-moving events should include the following:
– Shanghai’s economy contracted again in May, albeit at a slower rate.
Tesco (OTC: TSCDY) of the United Kingdom has reaffirmed its profit forecast despite a drop in sales.
– Sweden’s Riksbank policy meeting
– American industrial output
– Santander (BME: SAN) appoints Hector Grisi as its new chief executive officer.
