Daily Wrap Up 22 June 2022

22 Jun 2022 04:12 PM

Growth fears gather pace

Worries about the health of the global economy have resurfaced and that has a triggered a wave of selling across the board as stocks, metals and oils are deep in the red. Last week, Fed boss Jerome Powell, cautioned the risk of a recession in the US has increased and those worries are weighing on sentiment today. Economies around the world are experiencing lower growth and to make matters worse, inflation and interest rates are on the rise. There is a creeping feeling that things are going to get worse before they get better, which explains the slump in stocks. Germany’s DAX is close to retesting the three-month low it posted last week. The FTSE 100 is down over 1.4% as it is a broad-based sell-off, with losses seen most notably in oil companies. Banks, retailers, and house builders are down on the session too. The S&P 500 was in the red, but it has since turned positive.

Inflation in the UK hit a new 40 year high as headline CPI ticked up to 9.1%, meeting expectations. There was some evidence that underling demand is slipping as core CPI cooled from 6.2% to 5.9%. That could be down to the BoE’s actions as the bank started hiking rates in December. It appears the high cost of living is here to stay seeing as PPI output and PPI input increased. If costs are still rising for producers, that spells trouble for consumers are those costs will probably be passed on to the retailer. Sterling has had a mixed reaction to the news as it is weaker versus the US dollar, and the safe-haven currencies, the yen and the Swiss franc. The pound is up against the Canadian dollar and the Australian dollar, but that is most likely a function of weakness in commodity currencies than strength in the pound.

Copper has been in a downtrend recently and today it has fallen to a 15-month low. The red metal is seen as a good barometer for the health of the global economy, so the fact it has dropped to, yet another multi-month low says a lot about the macroeconomic outlook. Metals are lower across the board as nickel, iron ore and aluminium are in the red too.

WTI is down over 4.5% as concerns about future demand levels mount. Oil has been edging lower recently due to the chatter about a potential recession in the US and those fears have come to a head. The energy has remained at an elevated level for several months due to supply issues but now it seems the penny has dropped with respect to demand.

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