Today’s Stock Exchanges, June 15th. Markets are betting on a US recession. After the Fed, it’s up to the ECB: rates towards the peak since 2001
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MILAN – After the Fed, it’s up to the ECB. Yesterday evening the US central bank announced the expected “pause” in rate hikes – after ten consecutive tightenings – but also hinted that it will start moving again in the summer and there is room to go up 50 points by the end of the year. It is no coincidence that the US bond rate curve has accentuated its dynamics and in fact the market is betting that the Fed will not be able to avoid an American recession in the short term. Today, instead, it’s the turn of the Eurotower which should announce a 25 basis point move, bringing the deposit rate to 3.5%, the highest since the summer of 2001. The words of Lagarde and Schnabel in recent days have made it clear that the ECB is more concerned about the risk of doing too little to fight inflation that has dropped, yes, but above all thanks to the energy slowdown and then remains above 6% against a target of 2%. Asian stocks moved higher, while Wall Street futures are weak.
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China slows industrial production
China cuts rates
The Chinese central bank lowered a reference rate for medium-term loans, a measure anticipated by the markets and intended to support economic growth. The interest rate for annual loans to financial institutions (MLFs) was cut to 2.65% from 2.75% previously, the central bank said. The last reduction in this rate dates back to August 2022.
Weak futures for Wall Street
Weak futures on Wall Street after the
Fed decision to leave interest rates unchanged.
The US central bank has decided to pause but has indicated the possibility of further increases in the coming months and this intimidates the markets. Futures on the Dow Jones lose 0.11%, those on the Nasdaq mark -0.09% and those on the S&P 500 register -0.08%.
China slows industrial production
Industrial production slowed down in China in May. The growth was 3.5% compared to the same month of the previous year. The figure is slightly lower than the forecast of +3.6%, and constitutes a decrease compared to the +5.6% in April, while in March the increase was 3.9%. However, this is the 12th consecutive month of growth in industrial production.
Oil rebounds
Oil prices rally after yesterday’s drop: China’s industrial production and retail sales growth in May missed forecasts, reinforcing concerns over a weak economic recovery in the world’s largest oil importer, and the central bank China lowered two key interest rates this month for the first time in nearly a year to support the economic recovery, prompting markets to reassess the demand outlook in the world’s largest importer of crude oil. Brent futures rose 0.48% to $73.55 a barrel while US West Texas Intermediate crude rose 0.32% to $68.48 a barrel. Both benchmarks fell 1.5% yesterday after the US Federal Reserve decided to leave interest rates unchanged but indicated the need for further hikes this year, sparking fears of an economic slowdown and a reduction in the demand for oil.
Positive Asia after the Fed
The Asian stock markets continue to rise after the move by the Federal Reserve which decided to pause by keeping the level of interest rates unchanged at the range of 5-5.25%, as widely expected by the market, but indicated the possibility of new increases in the coming months. The markets reacted well to the moves of the Fed and the Chinese central bank which lowered the reference rate for medium-term loans, a measure intended to support the growth of the economy. China’s economy suffered a setback in May, with industrial production and retail sales growth missing forecasts.
The Nikkei Index rose 0.27%, Hong Kong’s Hang Seng Index rose 1.50% and the Shanghai Composite Index rose 0.35%. Seoul dropped by 0.24%.
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