The Federal Reserve will scrap its quantitative easing (QE) program on January 1, 2022. But the US labor market situation is raising concerns among investors again. The number of Americans filing for unemployment benefits unexpectedly increased by 2,000 to 373,000, indicating that the labor market recovery from the pandemic remains unstable. These numbers also raise concerns that new outbreaks continue to be one of the biggest downsides for the ongoing sustained economic recovery. Amid this news, the US stock indices closed the day in the red zone. The Dow Jones index decreased by 0.75%, the S&P 500 index fell by 0.86%, and the NASDAQ lost 0.72%. However, the analysts are confident that the growth of the indices will continue until the Fed moves from words to actions.
The European Central Bank adjusted its monetary policy. The ECB raised its inflation target to 2%. The figure is symmetric, meaning that negative and positive deviations from the target are equally undesirable. This means that monetary policy will not regulate short-term fluctuations in inflation. Eurozone inflation is expected to fall in June as labor shortage and delays rate in raw material supplies are declining. The rate of asset purchases on the ECB balance sheet decreased and that supported the euro. But the European stock indices also fell at the end of the day, due to the concerns about the prospects for economic recovery. The British indicator FTSE 100 lost 1.68%, German DAX decreased by 1.73% and French CAC 40 fell by 2.01%. But the overall fundamental picture in Europe remains positive.
Oil is rising in price again. The US oil inventories decreased by 6.87 million barrels to 445.48 million barrels last week. This is the lowest value since February 2020 and it has been declining for the seventh week in a row. Fuel prices will continue to rise due to the supply deficit in the market.
Gold corrected slightly yesterday. This drop was caused by a short-period rise in government bond yields. In general, the fundamental picture on precious metals remains unchanged. Analysts expect the gold and silver prices to grow.
China’s consumer price index, one of the main indicators of inflation, increased by 1.1% on a year-on-year basis in June. The figure is lower than the 1.3% increase in the previous month. Japan declared a state of emergency in the suburbs of Tokyo, just before the Summer Olympics. It also became known that the Tokyo Olympics will take place without spectators. The three-week lockdown in Sydney may be extended. Hundreds of additional police officers are patrolling areas of Sydney to ensure the fulfillment of city shutdown orders imposed to eradicate an outbreak of the highly contagious Delta strain. South Korea has reported 1,316 new cases of COVID-19 infection – a new record. Severe restrictions (up to the maximum) have been imposed in Seoul and the suburbs since Monday.
Main market quotes:
- S&P 500 (F) 4,320.82 -37.31 (-0.86%)
- Dow Jones 34,421.93 -259.86 (-0.75%)
- DAX 15,420.61 -272.07 (-1.73%)
- FTSE 100 7,030.66 -120.36 (-1.68%)
- USD Index 92.37 -0.27 (-0.29%)
Important events:
- China Consumer Price Index (m/m) at 04:30 (GMT+3);
- UK GDP (m/m, q/q) at 09:00 (GMT+3);
- UK BoE Gov Andrew Bailey’s Speech at 13:00 (GMT+3);
- ECB President Christine Lagarde’s Speech at 13:00 (GMT+3);
- Canada Employment Change (m/m) at 15:30 (GMT+3);
- Canada Unemployment Rate (m/m) at 15:30 (GMT+3);
- G20 meeting (First day).
