While Wall Street equities ended Thursday’s turbulent trading day higher, the euro fell against the dollar as economic data heightened the likelihood that Europe will experience a recession.
US markets recovered from a noon slump as Federal Reserve Chair Jerome Powell continued to promise a stern reaction to inflation during a second day of testimony on Capitol Hill. Powell disputed the premise that government pandemic aid was the primary reason fuelling US inflation.
However, as recession talk has intensified, according to Karl Haeling of LBBW, markets have “substantially changed rate hike expectations” during the past week. Investors now believe that rather than in 2023, the United States will end rate increases in 2022.
The S&P 500 index as a whole finished up 1%.
In the meantime, a significant study revealed that the eurozone’s economic growth collapsed in June as high prices stifled the region’s robust recovery from the severe lows caused by the coronavirus outbreak.
S&P Global’s carefully regarded monthly purchasing managers’ index fell from 54.8 in May to 51.9 this month. A number greater than 50 denotes growth.
On the back of decades-high inflation, PMI data also showed that Britain’s private sector business activity is stagnating at its lowest level in more than a year.
According to market analyst Michael Hewson at CMC Markets, “the latest PMI statistics from France and Germany have dragged on the euro, with economic activity slowing more than predicted in June, heightening concerns that both nations are heading into a recession.”
All the data leads to a recession, even though ECB (European Central Bank) policymakers continue to claim otherwise, he continued.
European stocks also declined, with Paris losing 0.6 percent and London closing the day down 1.0 percent. Following Germany’s decision to raise its alert level on natural gas supplies and move closer to rationing, Frankfurt fell 1.8 percent.
Another sign that investors are more concerned about the possibility of a recession is the decline in government bond yields, which lessens the financial impact that rising interest rates have on governments.
Commentators have been warning for some time that the abrupt rise in global interest rates intended to reduce inflation may be causing the world economy to grow less quickly.
Oil prices remained constrained as traders worried about weakening demand and the potential for a worldwide economic slowdown.
Even with restrictions on Russian oil supplies and China’s progressive lifting of lockdowns, Brent and WTI, the global and US benchmarks, have fallen during the past week.
Data released on Wednesday showing a rise in US stockpiles contributed to the selling of crude.
– Key figures at around 1530 GMT –
Euro/dollar: DOWN at $1.0526 from $1.0566 late Wednesday
Pound/dollar: DOWN at $1.2259 from $1.2266
Euro/pound: DOWN at 85.80 pence from 86.14 pence
Dollar/yen: DOWN at 134.94 yen from 136.26 yen
New York – Dow: UP 0.6 percent at 30,677.36 (close)
New York – S&P 500: UP 1.0 percent at 3,795.73 (close)
New York – Nasdaq: UP 1.6 percent at 11,232.19 (close)
London – FTSE 100: DOWN 1.0 percent at 7,020.45 (close)
Frankfurt – DAX: DOWN 1.8 percent at 12,912.59 (close)
Paris – CAC 40: DOWN 0.6 percent at 5,883.33 (close)
EURO STOXX 50: DOWN 0.8 percent at 3,436.29 (close)
Tokyo – Nikkei 225: UP 0.1 percent at 26,171.25 (close)
Hong Kong – Hang Seng Index: UP 1.3 percent at 21,273.87 (close)
Shanghai – Composite: UP 1.6 percent at 3,320.15 (close)
Brent North Sea crude: DOWN 1.5 percent at $110.05 per barrel
West Texas Intermediate: DOWN 1.8 percent at $104.27 per barrel