Stock Market

Marketmind Rewritten: Data Deluge in the U.K. and the Looming Recession

Let’s take a peek at what’s coming up today in European and global markets, as observed by Vidya Ranganathan.

A whole bunch of numbers is scheduled to be released by Britain today – GDP, industrial output, construction data – and it will undoubtedly cast doubt on the Bank of England’s claim that both the economy and its banks are handling the rapid and aggressive interest rate hikes just fine.

Despite experiencing 13 consecutive rate increases, Britain stands out as a hawkish outlier among major economies. The task at hand for the BOE is no walk in the park: they must rein in the highest inflation rate in the developed world, all while dealing with a labor market that’s tighter than a drum and the challenges of policy transmission delays.

It’s highly likely that both GDP and industrial output have shrunk in May compared to the previous month. This will only serve to reinforce market sentiment that as interest rates inch closer to 6%, Britain is hurtling towards an imminent recession.

Gilt yields have eased off a bit this week, buoyed by the latest inflation figures in the United States, which were rather lackluster. Investors are now starting to believe that the Federal Reserve will call it quits on rate hikes after July. As a result, the sterling has soared to its highest level in 15 months, causing Wall Street and other global stock markets to rejoice. Meanwhile, the dollar had its worst session in five months overnight, taking a nosedive of over 1% against the euro, marking its lowest point in over a year.

In the midst of all this, the European Central Bank is set to release the minutes from their June policy meeting. However, it’s unlikely that these minutes will bring any surprises. Policymakers have been crystal clear about their intentions to raise rates this month, wind down the crisis-era stimulus programs, and tackle the ongoing inflation problem head-on.

Oddly enough, China’s impact on market sentiment appears to be minimal today, despite trade figures falling short of estimates and revealing the struggles of their recently reopened economy.

Here are the key developments that could potentially influence markets on Thursday:

  1. European Central Bank’s June meeting minutes
  2. U.K.’s estimates for GDP, industrial production, and construction in May

Hold on tight as the markets brace themselves for the wave of economic data and the ripple effects they will undoubtedly create. It’s going to be an interesting ride!

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