Morning Auction: It's Gonna Hurt

Morning Auction: It’s Gonna Hurt

A symphony of light illuminates the south facade of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, December 30, 2021. REUTERS/Wolfgang Rattay/File Photo

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A look at the day to come on the markets of Julien Ponthus.

Recession-watching investors learned little they didn’t already know from the world’s top central bankers gathered at the European Central Bank’s annual conference in Portugal.

Fighting inflation is the top priority and avoiding a recession comes second, they said, with US Fed Chairman Jerome Powell acknowledging that some “pain” would be involved in the process. Read more

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“Certainly there is a risk central banks will tighten monetary policy too quickly, Powell told an audience all too aware of the risks of battling a historic surge in inflation.

And indeed, the first half of 2022 marks the worst half for Wall Street’s S&P 500 (.SPX) since the 2008 financial crisis and even beats Black Monday’s H2 1987, which saw the benchmark fall 18 .7%.

With just one session left, the US index is expected to see a 20% decline over the past six months, a plunge that has only been matched twice in the past 50 years.

Now, with consumer sentiment falling rapidly and the US economy contracting more than expected in the first quarter, the question is: how deep is this bear market?

Well, with Asian markets ending the quarter on a gloomy mood and plunging European and US equity futures this morning, the future doesn’t look bright.

What if investors, who have bought $195 billion net worth of stocks this year despite the massive sell-off, suddenly head for the exit if earnings forecasts are finally revised down?

Macro data also weakens. Japanese industrial production recorded its biggest monthly decline in two years, while New Zealand business confidence fell again in June.

Key developments that should further guide markets on Thursday:

– China’s factory and service sectors shake off 3 months of lockdown pain Read more

– OPEC+ is unlikely to pump more oil read more

– Swiss retail sales in May down 1.6% year on year

– UK posts record current account gap, economy grew as previously thought in Q1 Read more

– Kraft Heinz pulls UK retailer Tesco’s products into price line Read More

– Germany May Retail Sales, May Import Prices, June Unemployment Data, June Preliminary CPI

– US PCE index

– Meeting of the Central Bank of Colombia

– meeting of the Swedish Riksbank; The monetary policy report will be published at 07:30 GMT

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Report by Julien Ponthus

Our standards: The Thomson Reuters Trust Principles.

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