Investors worry about stubborn inflation and diminishing economic growth, leading to a fall in European bonds and US equity futures.
Contracts on Nasdaq 100 and S&P 500 dropped by 0.5% each after these indexes recorded their 11th decline in 13 weeks. The interest in dip buyers led European stocks to open higher. The dollar fluctuated ahead of the Independence Day holiday. Italian bonds tumbled.
Global bonds and stocks are in the worst ever grip of selloffs seen in the last three decades as chances of the US or even global recession are spooking investors. Also, the continued inflation has left Federal Reserve with little room for applying brakes on monetary policy tightening. The dangerous combination has offered challenges to the trading market not seen since the 1970s.
SPI Asset Management managing partner Stephen Innes noted that the market is worried about economic growth, inflation, and liquidity withdrawal. Compared to earlier downturns, this time, unemployment is lower and inflation much higher.
The global benchmark, the MSCI All-Country World Index, fell by 21% in the 2022 first half recording the worst loss since 1988. Also, the Bloomberg Global Aggregate Index for investment-grade debt fell by 14%, its worst decline since 1990.
On Monday, the dollar was lower by less than 0.1%, sending the British pound and euro higher by 0.2%. The Stoxx 600 benchmark climbed 0.9% in Europe. Travel, leisure, and energy stocks were among the biggest gainers.
Italian bond fell before the meeting to settle political tension between Five-star leader Giuseppe Conte and Prime Minister Mario Draghi. Italy’s 10-year bond yield jumped to 3.16%, a gain of 7 basis points and widening its spread to 1.9 % over the German Bund.
In China, officials were trying to combat another covid flare with disruptive lockdowns and mass testing to eliminate the virus that could impact the economically significant region. Among the biggest dollar payment default this year in China has been the failure of Shimao Group Holdings Ltd to pay a $1 billion note that matured on Sunday.
Crude oil hovered around $108 a barrel, and Bitcoin is not retreating to the $19000 level.
Events to look out for this week:
- US factory orders, durable goods data on Tuesday
- US PMIs, JOLTs job openings on Wednesday
- Report on EIA crude oil inventory on Thursday.
- James Bullard, St. Louis Fed President, and Fed Governor Christopher Waller to speak Thursday
- June employment report for US, Friday
Market Moves:
Stocks and Commodities
- Nasdaq 100 futures fall 0.6%
- Dow Jones Industrial Average futures fall 0.5%
- MSCI Emerging Markets Index fell 0.2%
- Brent crude rose to $111.83 a barrel, up 0.2%
- Spot gold was unchanged
Currencies
- Bloomberg Dollar Spot Index remained unchanged
- Euro rose to $1.0435, up 0.2%
- Japanese yen fell to 135.46 per dollar, down 0.2%
- Yuan was unchanged at 6.6951 per dollar
- The British pound rose to $1.2122, up 0.2%
