Eurozone EuroCOIN, PPI; Germany Foreign Trade; Frankfurt Euro
Finance Summit; U.S. Independence Day, financial markets closed; no
major corporate earnings expected
Shares in Europe should open higher in a likely subdued trading
session on Monday, with U.S. markets closed. In Asia, stocks were
mixed; the dollar and oil faltered; bonds continued to rally; and
gold edged up.
European stocks were poised for modest opening gains on Monday
despite a generally cautious Asian session, as worries over high
inflation and slowing growth continue to weigh on markets.
In the week ahead, the Federal Reserve releases minutes from its
June monetary-policy meeting, at which officials approved a
0.75-percentage-point increase in its benchmark federal-funds rate,
its biggest rate rise since 1994. The minutes should provide more
details on the internal discussions over the decision.
Investors will also gear up for Friday, when the June U.S.
nonfarm payrolls and unemployment report is released.
Read: China's Slowdown Could Tamp Down Global Inflation
The dollar was off Friday's highs but remained generally firm,
with the WSJ Dollar Index just short of a 20-year high set June
Commerzbank said market sentiment remains fragile and uncertain
as investors grapple with signals from the recent drop in sovereign
bond yields in the U.S. and Europe. The question is whether this
indicates a peak in inflation or increasing risks of a slowdown.
Investors may get some clues from Fed minutes and the U.S.
employment report due this week.
Bank of America said the ECB forum in Sintra reinforced the
message of a paradigm shift in inflation which will require further
"But whilst 50bps has become the norm for many central banks,
the ECB remains cautious as the Fed remains on the offensive. We
expect EUR/USD to remain under pressure through the summer."
Read: EU Sets First Rules to Regulate Cryptocurrencies
Treasury yields continued to fall in Asia, after the 10-year
note yield tumbled further below 3% on Friday, suffering its
biggest weekly drop since March as recession fears continued to
grip the bond market.
Lower bond yields are expressing a view that growth prospects
are poor at the moment, said Seaport Global Holdings.
"I think we are headed for the biggest, most traumatic recession
since the global financial crisis. Inflation cannot be contained
and will probably surge before it falls. The Fed will have to raise
rates at a very quick pace and that will most likely affect equity
prices for the foreseeable future."
Read: Bond ETFs Attract New Investors With Narrower
S&P affirmed Finland's AA+ rating on Friday, cutting its
growth forecast due to factors including Russia's invasion of
Ukraine but noting "effective efforts" to reduce trade exposure to
S&P lowered its real GDP forecast for 2022 to 1.3%, down
from 2.8% at the beginning of the year. "Imports from Russia are
concentrated in the energy sector, but Finnish exports to Russia
are more diversified. We expect the economic impact from shifting
trade to be contained, and mainly concentrated in the forestry and
air transportation sector."
Finland's inflation is more than 7%, but this is still less than
many peers, S&P said.
Oil edged lower on continued demand concerns spurred by
However, prices may be supported in the near term due to tight
"With OPEC+ opting to raise production by 648,000 [bpd] again in
August but not comment beyond then, there is a cloud of uncertainty
over the supply side again," said OANDA.
"The tight market is here to stay and the only real case for
significant price declines is a recession, sadly."
Gold futures were firmer in Asia, recovering Friday's
ANZ said prices were pressured following India's decision to
raise import duties for refined gold. "This could weaken demand
just as outflows from gold-backed ETFs pick up.
SPI Asset Management said: "We will likely need to keep an eye
on how two-year yields impact the dollar, given gold's strong
inverse relationship to the greenback as a primary signal that the
market thinks the Fed may tap the rate hike breaks a touch."
Copper remained under pressure, weighed down by worries over
China's zero-Covid approach.
President Xi's recent reaffirmation of China's commitment to
this policy confirms a willingness to endure temporary economic
pain for citizens' health and safety, said Commonwealth Bank of
Australia. However, the policy is likely to drag on the recovery of
the property-construction sector, which accounts for an estimated
20%-30% of China's copper, aluminum and zinc consumption.
Iron ore futures were almost 5% lower, extending their broad
downturn in recent weeks, as global commodities have retreated due
to fears of aggressive rate rises by the Fed.
Galaxy Futures reckons the weakness will likely drag on in the
near term, given muted steel production activities in China due to
continued local Covid-19 outbreaks, as well as low summer
It added that fast inflation in the U.S. is another negative
that could weigh on overseas steel demand and hurt iron ore
TODAY'S TOP HEADLINES
China's Slowdown Could Tamp Down Global Inflation
China's slowdown may have a silver lining for the rest of the
world: weaker inflation.
Growth in the world's second-largest economy has tumbled this
year as Covid-19 outbreaks triggered mass lockdowns and business
closures. The government has announced a range of stimulus
policies, but many economists say Beijing's 2022 growth target of
around 5.5% is unlikely to be achieved as long as the threat of new
lockdowns hangs over the economy.
Banks Get Burned by Risky Debt, Imperiling Buyout Activity
Investment banks are facing big losses on leveraged buyouts they
agreed to finance before markets soured, further chilling the
outlook for deal activity.
Bank of America Corp., Credit Suisse Group AG and Goldman Sachs
Group Inc. are among the banks that could collectively lose
billions of dollars on buyout loans they agreed to provide when
demand for the debt was running high.
Bond ETFs Attract New Investors With Narrower Offerings
This wouldn't seem to be the best of times for exchange-traded
funds that focus on fixed income. A resurgence of inflation not
seen in 40 years has put upward pressure on interest rates, which,
in turn, has sent prices of bonds and bond funds tumbling.
Yet new investment in fixed-income ETFs continues apace.
Markets Had a Terrible First Half of 2022. It Can Get Worse.
We're halfway through the year, but markets are beginning to
fear we're not even halfway through the bad news 2022 has in
The first six months were full of surprises: Inflation. The
biggest selloff in bonds in four decades. A plunge in tech stocks
rarely matched in history. And the implosion of crypto.
Crypto's Domino Effect Is Widening, Threatening More Pain
Turmoil in the digital-assets ecosystem has grown in recent
weeks, with losses in cryptocurrencies blowing holes in balance
sheets and pushing firms near bankruptcy.
After a pair of cryptocurrencies crashed, wiping out billions of
dollars in value in May, a British Virgin Islands court this past
week ordered a hedge fund that had survived several crypto
downturns to liquidate. Another platform that counts the hedge fund
as an investor capped withdrawals while evaluating how the hedge
fund's woes would affect its liquidity.
While Big Stock Sales and IPOs Stall, Energy Investors Are
With stock indexes falling, interest rates rising and inflation
running hot, it has become nearly impossible for companies or
investors to sell big chunks of stock or go public at the price
they want. Unless you're in energy, where business is booming.
EnerVest Ltd., a Houston-based private-equity firm that focuses
on energy investments, said it has sold 28.4 million shares of
Magnolia Oil & Gas Corp., netting $661 million in proceeds,
including $257 million last month. The well-timed initial public
offering of natural-gas company Excelerate Energy Inc., one of the
best-performing IPOs this year, boosted the net worth of oil
magnate and founder George Kaiser by more than $1 billion.
EU Sets First Rules to Regulate Cryptocurrencies
European Union officials agreed on rules that would regulate the
crypto market in the bloc, forcing platforms to seek authorization
to operate and providing safeguards to users.
The agreement still needs to go through Brussels' complex legal
process and might not kick in until 2024. However, officials say it
will make the EU the first broad region with common crypto-asset
regulation in the world. Some countries have national legislation
governing digital assets, but these would mark the first EU-wide
Russia Claims Control of Luhansk as Ukrainian Forces Retreat
Russian forces have captured Lysychansk, the last major
Ukrainian stronghold in Luhansk, effectively placing under Russian
control the eastern region at the center of the war in recent
Russia's defense minister, Sergei Shoigu, told President
Vladimir Putin on Sunday that Russian forces, together with militia
from the self-proclaimed Luhansk People's Republic, had established
full control over Luhansk, Russia's Ministry of Defense
Strife Rises in Tunisia as Democracy Erodes, Economic Hardship
TUNIS, Tunisia-A new constitution that would consolidate the
power of Tunisian President Kais Saied is generating dissent among
Tunisians who are angry at what they describe as his increasingly
autocratic rule and who are grappling with rising food prices and
On Thursday, Mr. Saied presented a draft version of a new
constitution that would grant him the ability to extend his tenure
beyond the current limit of two presidential terms. It would also
increase the powers of the presidency and curtail those of the
parliament, which, under the existing constitution, check the
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Expected Major Events for Monday
06:00/ROM: May PPI
06:00/GER: May Foreign Trade
06:30/SWI: Jun CPI
07:00/SPN: Jun Unemployment
07:00/TUR: Jun CPI
07:00/TUR: Jun PPI
07:30/EU: Jun EuroCOIN indicator of euro area economic
09:00/EU: May PPI
14:00/DEN: Jun Foreign Exchange & Liquidity
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This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
July 04, 2022 00:36 ET (04:36 GMT)
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