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Daily Wrap Up 28 June 2022

28 Jun 2022 04:31 PM

Oil stocks fuel FTSE’s rally

Stock markets in Europe are on track to finish higher as bullish sentiment is doing the rounds. Overnight, China eased its restrictions relating to Covid-19 as case numbers are falling. Even though the country still has measures in place, the move is interpreted as a sign that things are moving in the right direction, which has lifted sentiment across the board as stocks, oils and industrial metals are higher. The FTSE 100 is up over 1% thanks to a rise in oil, and banking stocks. Over in the US, the picture is a little less upbeat as the S&P 500 has handed back earlier gains and is now flat, and the NASDAQ 100 has slipped into the red. The nudge higher in bond yields seems to be weighing on the mood. Also, playing into the mix is the disappointing CB consumer sentiment reading as it slipped from 103.2 to 98.7.

The US dollar index is up 0.4% as the US 10-year yield hit 3.24%, which is a large increase on the 3.07% that was registered last week. In June, the Fed hiked rates by 75 basis points, it was a larger lift than economists were expecting. As a reaction to the news, the yield surged to an 11-year high of 3.48%, and now the yield is rising again, it seems as if the wider uptrend is resuming. Should yields continue to rise, that should assist the US dollar.

The euro is mixed as Christine Lagarde, the European Central Bank President, said the bank is ready to ‘move faster’ on interest rates to tackle inflation. The update comes a few weeks ahead of the next ECB meeting, where the bank is widely expected to lift rates by 25 basis points. Once the July meeting is out of the way, the September update will come into focus as there is chatter the bank might hike rates by 50 basis points. Inflation is at a record high in the euro area, and it is at its highest mark in almost 50 years in Germany, so there is mounting pressure on the ECB to act.

The Japanese yen often rallies when traders are seeking out safe haven assets and the opposite is often the case then the overall mood is positive, and that is what we are seeing today. There is a broad rally across the board, as metals, oils and equities are rising, and as a result, the Japanese yen is in the red. Adding to the yen’s woes is the fact the Bank of Japan are determined to maintain their ultra-loose monetary policy.

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