OPEC+ plans to exclude Russia from the group's production. Inflation in the Eurozone is at a high level again

The US stock market closed yesterday in a negative area. At closing time on Friday Dow Jones (US30) decreased by 0.67% (-0.22% for the month), S&P 500 (US500) lost 0.63% (-0.56% for the month). Technology Index NASDAQ (US100) lost 0.41% yesterday (-0.63% for the month). All three indices were down on the month. Among the factors that put pressure on the US equity market was the fear that the high inflation would negatively affect corporate earnings as the Q2 earnings season is just around the corner.

Christopher Waller of the Federal Reserve Board of Governors said the Fed should raise rates by 50 basis points (bps) at each meeting until US inflation begins to decline.

Statistical data released on Tuesday showed a decline in US consumer confidence in May. The index, calculated by the Conference Board research organization, fell to 106.4 points in May from a revised 108.6 points in April.

The Biden administration is trying to complement the Fed's efforts to bring down inflation by lowering the cost of prescription drugs and health care, as well as proposing in Congress to increase the use of renewable energy.

Stock markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 1.29% (+3.22% for the month), French CAC 40 (FR40) lost 1.43% (+0.67% for the month), Spanish IBEX 35 (ES35) decreased by 0.89% (+4.93% for the month), British FTSE 100 (UK100) added 0.10% (+0.61% for the month). Consumer prices in Europe have hit another record. Inflation in the euro area accelerated from 7.4% to 8.1% y/y. The main reason for the increase was high energy prices, which affected 2⁄3 of overall inflation. Core inflation (which excludes food and fuel prices) rose from 3.5% to 3.8%. The price increase is becoming more widespread, adding to the pressure on the ECB. Analysts predict that inflation will remain high until the end of 2022, so the risks are shifted toward higher interest rates. With a high probability, the ECB will raise the rate by 25 basis points at the July meeting and by 50 bps at the September meeting.

Oil is getting cheaper as OPEC+ is considering excluding Russia from the group's production. Western sanctions and a partial European ban undermine Moscow's ability to produce more oil. Russia's oil production is expected to fall by about 8% this year. For more than a year now, Saudi Arabia, which leads the 23-nation OPEC+ global alliance of oil exporters, has been making the group's countries supply less crude than the market needs in order to maintain optimal prices per barrel. Although the supply crisis remained manageable until the end of last year, the invasion of Ukraine and subsequent sanctions on Russia have led to disruptions in production by at least another 3 million barrels a day.

Asian markets traded without a single dynamic yesterday. Japan's Nikkei 225 (JP225) decreased by 0.33% (+1.72% for the month), Hong Kong's Hang Seng (HK50) was up 1.38% (+1.48% for the month), while Australia's S&P/ASX 200 (AU200) was down 1.03% (-1.85% yesterday). May survey data from the Caixin survey indicated a shift to a more stable operating environment in China's manufacturing sector, as firms reported much softer declines in both production and new orders.

Firms also recorded a slower decline in buying activity, although delays in the supply chain generally remained significant.

Australia's GDP growth slowed in Q1 2022. The economy grew by 0.8% in the last quarter, down from 3.6% in Q4 last year. But it should be noted that the economy was recovering late last year due to the lifting of restrictions after the pandemic, so a GDP growth of 0.8% today is not a bad result compared to other global economies. In the coming quarters, Australia will face higher prices undermining purchasing power and rising interest rates, so analysts are forecasting a slightly reduced annual GDP growth rate in 2022 to 4.0%.

Main market quotes:

S&P 500 (F) (US500) 4,132.15 -26.09 (-0.63%)

Dow Jones (US30) 32,990.12 -222.84 (-0.67%)

DAX (DE40) 14,388.35 -187.63 (-1.29%)

FTSE 100 (UK100) 7,607.66 +7.60 (+0.10%)

USD Index 101.81 +0.14 (+0.13%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
  • – Australia GDP (q/q) at 04:30 (GMT+3);
  • – Eurozone German Retail Sales (m/m) at 09:00 (GMT+3);
  • – Eurozone Spanish Manufacturing PMI (m/m) at 10:15 (GMT+3);
  • – Eurozone Italian Manufacturing PMI (m/m) at 10:45 (GMT+3);
  • – Eurozone French Manufacturing PMI (m/m) at 10:50 (GMT+3);
  • – Eurozone German Manufacturing PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks at 14:00 (GMT+3);
  • – Canada Manufacturing PMI (m/m) at 15:30 (GMT+3);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3);
  • – US JOLTs Job Openings (m/m) at 17:00 (GMT+3);
  • – Canada BoC Interest Rate Decision at 17:00 (GMT+3);
  • – Canada BoC Statement at 17:00 (GMT+3);
  • – US FOMC Member Williams Speaks at 18:30 (GMT+3);
  • – US FOMC Member Bullard Speaks at 20:00 (GMT+3).

by Justforex, 2022.06.01

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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