Sell-offs in Equities Deepen, Risk Aversion Mounts
30 June 2022
Global equities came under severe selling pressure on Wednesday, which continued Thursday, sending equity benchmarks 1-2% lower during the EU session.
German DAX dropped to the lowest level since early March, while US indices are on their way to the recent cycle lows.
The FX market saw some USD buying yesterday, but the gains are being erased today, with the Dollar index declining briefly. Industrial metals remain under pressure amid global recession fears, with silver falling toward the psychological level of 20 USD, gold was down near 1,800 USD, and copper traded deeply in the red.
Fed remains hawkish (at least verbally)
Markets were influenced by remarks made by Jerome Powell, the chairman of the Federal Reserve, yesterday. He outlined the possibility that the US central bank's interest rate increases may cause the economy to slow down too much. But sustained inflation is the biggest worry, he continued. Powell made these remarks at a symposium hosted by the European Central Bank.
Meanwhile, Fed Bank of Cleveland President Loretta Mester advised authorities to take decisive action to reduce inflationary pressures. Mester stated that even if it would push the economy into a recession, the Fed is "only at the beginning" of raising rates, and she wants to see the benchmark fed funds rate hit 3% to 3.5% this year and "a little bit above 4% next year."
Later today, the usual Thursday's US jobless claims are on the agenda, along with personal spending and income data. The Chicago PMI for June will also be released, projected to decline marginally.