GLOBAL CAPITAL MARKETS OVERVIEW:  

Europe's major stock indexes closed in negative territory on Wednesday, snapping a three-day winning streak, as recession fears dented risk sentiment again. Domestically, the Dax fell 1.7%, and the Stoxx 600 lost 0.7%, dragged by real estate, automakers, and industrials. On the economic data front, German inflation fell below expectations at 7.6% in June, down from 7.9% in May, in stark contrast to a forecast of 10.2% in Spain, which has not seen inflation since 1985. Meanwhile, business and consumer confidence indicators in the eurozone were mixed, with consumers and retailers turning more pessimistic, while sentiment among service providers and manufacturers unexpectedly improved. On the earnings front, H&M's second-quarter earnings were upbeat, rising 2.2%, reflecting a recovery in spending on low-cost apparel as consumers return to the office and socialize. The CAC 40 fell 0.9% to end at 6,031.48, erasing a rally from the previous session, as the central bank's determination to fight inflation reignited fears of slowing global growth, overshadowing concerns that China is gradually emerging from the coronavirus lockdown. The tech and auto sectors were the biggest losers. Renault fell 5.57%, and Stelantis fell 2.81%. Oufei Technology fell 4.93% among technology stocks, and Capgemini fell 3.26%. Commercial property stocks were also dragged down, with Unibail Rodamco Westfield leading losses (-4.1%) as European office stocks fell on a Bank of America analyst downgrade. Conversely, total energy rose 0.61% on higher crude oil prices and Bernstein's bullish rating. On Wednesday, the FTSE MIB index fell 1.2% to close at 21,830, still shaky as concerns over economic contraction resurfaced. The prospect of higher borrowing costs weighed on Milan's tech sector as STMicroelectronics shares fell 2.1%. Automakers also posted significant losses, with CNH Industrial and Stellantis down 4.3% and 2.8%, respectively, while UniCredit slumped 2.4%, leading to losses in heavyweight banks. Meanwhile, energy stocks outperformed the broader index and closed in the green, supported by a 0.9% rise in Eni Group, as EU officials expect Europe to replace two-thirds of Russia's energy imports by the end of the year. On Wednesday, all three major U.S. stock indexes lost initial momentum trading around horizontal lines as investors reassessed the prospect of tighter monetary policy amid slowing economic growth. A slew of recent U.S. economic data, including worse-than-expected GDP data and poor consumer confidence data, has lowered investors' expectations for a rate hike by the Federal Reserve. So far, however, the deteriorating growth outlook has not been enough to change the central bank's tightening policy. Several Fed policymakers, including Chairman Jerome Powell, have made a case for faster rate hikes to curb stubbornly high inflation, with markets now pricing in a 75-basis point hike in July. On the corporate front, Bed Bath & Beyond's shares fell more than 20% after the company failed to meet Wall Street expectations and announced the resignation of its chief executive. General Mills, on the other hand, rose 4% after beating earnings and revenue forecasts for the most recent quarter. According to the EIA's latest report, U.S. crude inventories fell by 2.762 million barrels in the week ended June 24, after falling by 386,000 barrels the previous week. Meanwhile, crude inventories at Cushing, Oklahoma, fell by 782,000 barrels, while gasoline inventories rose by 2.645 million. Distillate stockpiles, including diesel and heating oil, rose by 2.559 million barrels. Canada's main stock index, the S&P/TSX, traded sideways higher on Wednesday, with oil and gas stocks tracking crude futures higher amid tight global supplies. However, gains were capped by losses in heavyweight miners, driven by gold prices. Fall inhibition. In a company update, Exxon Mobil and Canadian partner Imperial said they would sell their Canadian assets in Montney and DuVernay to Whitecap Resources for $1.9 billion on Tuesday. Russia's MOEX-Russia index fell 1.1% to close at 2,381, extending yesterday's losses as investors focused on new Western measures against Russia. Financials were the biggest losers, with TCS Group and Sberbank down more than 5% and VTB shares down more than 3%. Mining stocks continued to slide after G7 leaders agreed to halt Russian gold imports. The ban added to low confidence in the industry as recession fears dented demand for the metal, and a surge in the ruble pushed up prices for importers. Shares in Norilsk Nickel fell 3.3 percent. Meanwhile, shares in Gazprom, which has continued to slash its gas exports to Europe despite soaring prices, have struggled. On Wednesday, the Shanghai Composite fell 1.4% to close at 3,362 points, while the Shenzhen Composite fell 2.2% to close at 12,697 points, down sharply from a nearly four-month high as investors continued to rally in mainland stock markets over the past two months. Profit-taking afterward. Tuesday's decline also offset gains from the previous session, when China announced it was easing quarantine requirements for incoming travelers in what analysts see as the biggest easing of its "zero-coronavirus" strategy so far, but the impact faded on Wednesday. Analysts believe that for the rally to continue, investors want to see the reopening continue on top of a more accommodative policy. Rising new energy and auto stocks led to losses, with Amperex (down 2.1%), Longi Green energy (down 5.1%), Tianqi Lithium (down 4.4%), BYD (BYD) (down 6%), and Chongqing Changan (down 10%) fell sharply. Japan Nikkei 225 lost 0.91% to end at 26,805, while the broader Topix index fell 0.72% to 1,894 on Wednesday, retreating from a two-week high, led by chip-related stocks. Japanese stocks also tracked overnight losses on Wall Street, as a drop in U.S. consumer confidence weighed on investor sentiment in June, underscoring the looming risk of a recession. The biggest losers in the technology sector were Tokyo Electron (-2.8%), Murata Manufacturing (-2.6%), Renesas Electronics (-3.6%), Filo Technology Holdings (-3.9%) and Sumec (-2.4%). Other index heavyweights also fell, including SoftBank Group (-1.6%), Kawasaki Keesen (-3.7%), Sony Group (-1%), Toyota Motor (-1.8%) and Inpex Corp (-2.8%). Meanwhile, domestic data reviewed by investors showed solid retail sales growth in May, while consumer confidence fell to an 18-month low in June. Australia S&P/ASX 200 fell 0.94% on Wednesday to close at 6700, retreating from a two-week high, tracking Wall Street's overnight losses as a drop in U.S. consumer confidence in June weighed on investor sentiment, highlighting a recession is looming risk. Gold stocks led losses on weaker prices, with Newcrest Mining (down 3.7%), Northern Star Resources (down 5.5%), and Evolution Mining (down 6.6%) falling sharply. Tech and clean energy-related names also fell, including auto sales. com (down 12.1%), Xero (down 4.4%), Block Inc (down 6.2%), Pilbara Minerals (down 3.4%), Lynas Rare Earth (down 4.8%) and Lake Resources (down 4.6%). Meanwhile, shares of Liontown Resources rose 5.6% after the company said it signed a lithium supply deal with Ford Motor Co. Elsewhere, data reviewed by investors showed Australian retail sales rose a solid 0.9% in May from April. New Zealand NZX 50 fell 0.54%, or 59.81 points, to settle at 10,958.81 on Wednesday, reversing gains from the previous three sessions and retreating from a nearly two-week high, as Wall Street endured a rough day on Tuesday, with the S&P 500 down more than 2 %, after news that U.S. consumer confidence fell to a 16-month low in June amid concerns that high inflation could lead to a sharp slowdown in the economy in the second half of 2022. Meanwhile, Reuters said Washington placed five Chinese companies on a trade blocklist on Tuesday for allegedly supporting Russian troops. Locally, the soaring cost of living is being felt in all parts of New Zealand as the Covid-19 outbreak continues, domestic media cites a consumer confidence survey. Notable decliners were Chatham Phosphate Rock (down 11.5%), Savor Ltd (down 7%), Smart Payments Holdings Ltd (down 6%), and Travel Holdings Ltd (down 3.9%).

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- RU: In April 2022, real wages in Russia fell 7.2% year-on-year after rising by 3.6% in the previous month, a decline exceeding the market expectation of 6.0%. It was the first drop in real wages since April 2020, but it was also the most significant drop since 2015. In addition, the average nominal wage increased by 9.4% year-on-year to 62,269 rubles.

- RU: Russian industrial output fell 1.7% in May 2022 from a year earlier, after falling 1.6% in the previous month, well below market expectations of 5.4%. It was the second and worst decline in industrial activity since February last year, reflecting a decline in manufacturing output (3.2% in April, down 2.1% in April), a drop in mining (0.8%, down 1.6% in April), %), the water and sewage industry declined (4.4%, 8.0%). On the other hand, electricity and gas supply output grew faster (4.0% vs. 2.0%). As a result, industrial production edged down 0.2% after falling 1.9% in the previous month on a seasonally and calendar-adjusted monthly basis.

- RU: Russia's unemployment rate unexpectedly edged to a record low of 3.9% in May 2022, down from 4.0% in the previous month, while market expectations were for 4.5%. The number of unemployed fell by about 100,000 from the last month to 2.9 million, while the employment rate rose to 59.8% from 59.7% in April, although employment was little changed at 71.9 million.

- US:  Federal Reserve Chairman Jerome Powell reiterated the central bank's commitment to do everything in its power to rein in high inflation, saying the more significant risk is that price stability won't be restored. Powell also noted at the European Central Bank's annual meeting that the U.S. economy is in good shape and well-positioned to withstand tighter monetary policy. He hopes growth will remain optimistic despite the risk that growth will slow more than needed. He also confirmed that the Fed is raising rates quickly and intends to enter restrictive territory soon. At its June 2022 meeting, the Fed raised the fund's speed by 75 basis points to 1.5%-1.75%, instead of the 50 basis points initially expected. Meanwhile, several Fed officials have advocated for a quick rate hike to bring inflation back to its 2 percent target. A rise of 75 or 50 basis points is expected in July.

- US: U.S. corporate profits fell 4.9% to $2.40 trillion in the first quarter of 2022, after rising 0.2% in the previous quarter and a preliminary estimate of a 4.3% decline. The company's internal funds available to invest -- inventory valuation-adjusted net cash flow fell 2.2% to $3.16 trillion, while net dividends rose 0.8% to $1.48 trillion. Meanwhile, retained earnings fell 12.8% to $0.93 trillion.

- US: In the first quarter of 2022, the U.S. economy contracted at an annualized rate of 1.6% quarter-on-quarter, slightly lower than the second forecast of 1.5%. It was the first contraction since the 2020 pandemic-induced recession, as record trade deficits, supply constraints, worker shortages, and high inflation weighed on the economy. Imports surged more than expected (18.9% vs. 18.3% in the second estimate), led by non-food and non-auto consumer goods, while exports fell less (-4.8% and -5.4%, respectively). In addition, consumer spending growth was revised down (1.8% vs. 3.1%) as increases in services spending led by housing and utilities were partially offset by lower spending on goods (i.e., groceries and gasoline). Meanwhile, private inventories shrank by 0.35 percentage point growth, well below the 1.09 percentage point drag in the second assessment. Fixed asset investment growth remained strong (7.4%), but housing investment slowed (0.4%, same as the second estimate).

- GE: Preliminary estimates show annual German inflation slowing to 7.6% in June 2022 from 7.9% in May, the highest level since Germany's reunification. Those figures compared with market forecasts of 8% as the government took steps to curb high oil prices from June 1, including tax cuts on petrol and diesel, which came into effect. Energy prices rose 38% in May, slightly less than 38.3%, while food prices rose 12.7% from 11.1% the previous month. Compared with the last month, consumer prices edged up 0.1%, the lowest level in seven months. The EU flat rate has also slowed, with the annual flat rate falling from 8.7% to 8.2% and the monthly flat rate to -0.1%, the first drop in CPI since November 2020. German data for June raised hopes that inflation across the eurozone has finally peaked and will soon start to slow.

- EU: In June 2022, the Eurozone Consumer Confidence Index fell to -23.6, the lowest level since April 2020, in line with preliminary estimates. Households' outlook on future financial wellbeing hit a record low, with assessments of past financial wellbeing falling to a nine-year low. At the same time, their willingness to buy commodities and expectations for the general economic situation has fallen to levels not seen since the recovery from the coronavirus pandemic.

- EU: In June 2022, the Eurozone Services Confidence Index unexpectedly rose to 14.8 from 14.1 in May, the highest level since November. That compares with a market forecast of 12.5, with managers more optimistic about business over the past three months but less optimistic about the future.

- EU: The Eurozone Industrial Confidence Index unexpectedly rose to 7.4 in June 2022 from 6.5 in May, beating consensus forecasts of 4.6. Manufacturers are more optimistic about future production and orders but less confident about employment, with more significant uncertainty overall.

- EU: The Eurozone Economic Confidence Index (ESI) fell to 104 in June 2022, the lowest level since March last year, compared to expectations of 103. Sentiment deteriorated among retailers (5.1 vs. -4.2), consumers (23.6 vs. -21.2), and builders (3.7 vs. 6.3) as the prospect of high prices and rising interest rates weighed on the industry (7.4 vs. 6.5) and service providers ( 14.8 vs. 14.1) but improved. Meanwhile, the Economic Uncertainty Index (EUI) rose to 24.8 from 23.4, and the Employment Expectations Index (EEI) fell to 110.9 from 112.6. Sentiment decreased in the five-euro zone economies, with the Netherlands (down 3.6), Germany (down 1.9), and Spain (down 1.9) showing the most notable performances.

- AU: Lightning readings show Australian retail sales rose 0.9 percent month-on-month in May 2022 to another record level of A$34.23 billion, beating the consensus forecast of 0.4 percent and following a final 0.9 percent increase in April. It was also the fifth consecutive month of growth as the economy recovered further from the ravages of the 2019-nCoV disease. Department stores rose the most, up 5.1%, followed by cafes, restaurants, and takeaway food services (1.8%), other retail (1.5%), food retail (0.6%), and homeware retail (0.4%). Retailing apparel, footwear, and personal accessories were the only sector to decline, falling 1.4% after three months of gains. Among states and territories, New South Wales (1.6%), South Australia (1.9%), Victoria (1.1%), Western Australia (0.2%), Tasmania (1.1%), and Northern Sales in the Territory (0.6%) increased. In contrast, sales in Queensland fell 0.4 percent in April, driven by tourism, while sales in the Australian Capital Territory fell 0.3 percent.

- JP: Retail sales in Japan rose 3.6% year-on-year in May 2022, beating consensus estimates of 3.3%, after rising 3.1% the previous month. The latest figures mark the third consecutive month of retail growth and the fastest growth since May 2021, as general merchandise sales rose sharply (20.7%) thanks to the government's lifting of all Covid-19 restrictions. 8% vs. April), while sales of textiles, apparel and accessories grew faster (11.8% vs. 9.7%), fuels (15.0% vs. 11.8%) and pharmaceuticals and cosmetics (5.0% vs. 3.0%), other products Sales increased further (8.6% vs. 9.7%). In contrast, food and beverage sales fell 0.2% after rising 0.5% in April, while machinery and equipment sales fell 3.3% after rising 0.8% in April. Meanwhile, motor vehicle sales fell for the ninth consecutive month (down 10.1% and 7.5%, respectively). Retail sales rose 0.6% month-on-month in May, the third straight monthly gain.

- SK: In June 2022, South Korea's Composite Consumer Confidence Index (CCSI) fell 6.2 percentage points from the previous month to 96.4, the lowest level since January 2021. Perceptions of current living standards (87 to 89), prospects (88 to 93), future economic conditions (69 to 84), and future household income (97 to 98) worsened. Meanwhile, households' inflation expectations for the year ahead rose to 3.9% from 3.3%, the highest level since April 2012.

LOOKING AHEAD:   

Today, investors will receive:

- USD: Core PCE Price Index m/m, Unemployment Claims, Personal Income m/m, Personal Spending m/m, Chicago PMI, and Natural Gas Storage.

- EUR: German Import Prices m/m, German Retail Sales m/m, French Consumer Spending m/m, French Prelim CPI m/m, German Unemployment Change, Italian Monthly Unemployment Rate, Unemployment Rate, and Italian 10-y Bond Auction.

- GBP: Current Account, Final GDP q/q, Nationwide HPI m/m, and Revised Business Investment q/q.

- JPY: Prelim Industrial Production m/m, and Housing Starts y/y.

- NZD: ANZ Business Confidence, and RBNZ Statement of Intent.

- CNY: Manufacturing PMI and Non-Manufacturing PMI.

- CHF: Retail Sales y/y, and KOF Economic Barometer.

- AUD: Private Sector Credit m/m.

- CAD: GDP m/m.

- All: OPEC-JMMC Meetings.

KEY EQUITY & BOND MARKET DRIVERS:

- IT: Italy's 10-year BTP bond yield fell to 3.5 percent, hovering near a two-week low hit on June 23, as fears of an economic slowdown reignited investors' preference for less risky assets. Demand for government bonds also rose after preliminary data showed Germany's headline inflation unexpectedly slowed in June, easing fears that the European Central Bank accelerated rate hikes in the third quarter. Meanwhile, investors continued to speculate on how well the ECB's new tool could prevent a split after the promise of higher interest rates sparked stark differences between member states' bond yields. As a result, the spread between the 10-year BTP and the Bundesbank narrowed further to below 2 points, reflecting the fall in the Italian debt premium.

- US: U.S. stock futures, which track the broader market, pared early losses into positive territory on Wednesday as investors reassessed the prospect of tighter monetary policy amid slowing economic growth. A recent flurry of data on the U.S. calendar, including worse-than-expected first-quarter GDP data, lowered investors' expectations for how much the Fed will raise interest rates as borrowing costs are expected to exacerbate a possible recession. Market participants will now pay close attention to the ECB forum, with Federal Reserve Chairman Jerome Powell scheduled to speak later in the day. In regular trading on Tuesday, the Dow was down 1.56%, the S&P 500 was down 2.01%, and the Nasdaq Composite was down 2.95%. All three major U.S. benchmarks rebounded earlier in the session after disappointing consumer confidence readings before giving up those gains.

- GE: German 10-year bond yields fell further to 1.57% at the end of June, as lower risk sentiment boosted demand for government bonds. However, an unexpected slowdown in domestic inflation eased fears of faster ECB tightening. Preliminary data showed that Germany's CPI rose 7.6% year-on-year in June, well below market expectations of 8%, and down from a record 7.9% in May. At the European Central Bank's annual forum, President Lagarde said the central bank would accelerate the pace of tightening in the third quarter if the inflation outlook remains high while confirming a 25-basis point hike in July, despite calls from other policymakers for a more aggressive rate hike. The ECB will also roll out new tools to avoid a split among member states, as promises of higher borrowing costs led to an uneven fall in bond prices earlier this month.

- AU: Australia's 10-year government bond yield fell to 3.7 percent, hovering at its lowest level in nearly three weeks and line with global yields, as recession fears led investors to seek the safety of government bonds. Meanwhile, domestic retail sales hit a record high in May, bolstering the Reserve Bank of Australia's confidence that the Australian economy can withstand higher interest rates. As a result, the central bank is expected to continue raising the cash rate in July, after the most significant rate hike in 22 years in June.

- UK: On Wednesday, the FTSE 100 futures contract fell nearly 0.7% to close at its highest level in more than two weeks, tracking negative global cues from its Asian and European counterparts. The previous day, markets returned to caution and volatility after a sharp sell-off on Wall Street on weak economic data and fresh recession fears. Meanwhile, traders will keep an eye on the ECB's forum when ECB President Christine Lagarde, Federal Reserve Chair Jerome Powell, and Bank of England Governor Bailey are due to speak.

STOCK MARKET SECTORS:

- High: Consumer Staples, Health Care, Information Technology, Communication Services.

- Low: Real Estate, Industrials, Materials, Energy, Financials.

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- OIL: U.S. crude inventories fell by 2.762 million barrels in the week ended June 24, after falling by 386,000 barrels the previous week, according to the EIA's latest report. Meanwhile, crude inventories at Cushing, Oklahoma, fell by 782,000 barrels, while gasoline inventories rose by 2.645 million. Distillate stockpiles, including diesel and heating oil, rose by 2.559 million barrels.

- EUR: The euro held steady at $1.05 at the end of June, near a five-year low of $1.04 hit in May, due to differences in the monetary policies of the European Central Bank and the Federal Reserve. Bets for the European Central Bank to raise interest rates faster in the third quarter eased as preliminary German inflation data came in below expectations and slowed from a record high in May. Meanwhile, President Lagarde confirmed interest rates at 25 basis points for July, pulling back uncertainty after multiple ECB policymakers called for a sharp hike. Conversely, Cleveland Fed President Mester backed a 75 basis point rate hike at the Fed's next meeting, as current conditions suggest inflation is still on an upward trend after the U.S. core PCE hike.

- CNY: The offshore yuan fell to around 6.70 per dollar, although Beijing's decision to ease quarantine requirements for incoming passengers supported expectations of a faster economic recovery. The yuan has come under pressure from differences in monetary policy, with People's Bank of China Governor Yi Gang saying China's policy stance will remain accommodative to support economic recovery. Those contrasts sharply with the hawkish tendencies of other major central banks, raising fears of increased capital outflows and further currency weakness. Analysts, however, don't expect the yen to depreciate as much as the yen as long as the People's Bank of China does not resort to the Bank of Japan-style ultra-loose easing.

- RUB: The Russian ruble touched a seven-year high of 47.75 roubles per dollar in late June before falling back to 51 roubles as a massive month-end inflow of taxes exacerbated Russia's huge trade imbalance and remaining capital controls. Commodities exports to Asia at soaring prices have kept the ruble strong despite European efforts to limit Russian energy and commodity purchases. In addition, the collapse in import activity due to sanctions halted domestic demand for dollars, exacerbating high fees and negative interest rates for banks’ deposits in currencies of “unfriendly” countries. A Russian sovereign bond default has put slight pressure on the rouble's momentum after Western sanctions blocked financial institutions from processing interest payments on $100 million of Eurobonds due in May. While Russia's economy is increasingly isolated from the West, the ruble has appreciated, making it the best-performing currency this year.

CHART OF THE DAY:

On Wednesday, the FTSE MIB index fell 1.2% to close at 21,830, still shaky as concerns over economic contraction resurfaced. The prospect of higher borrowing costs weighed on Milan's tech sector as STMicroelectronics shares fell 2.1%. Automakers also posted significant losses, with CNH Industrial and Stellantis down 4.3% and 2.8%, respectively, while UniCredit slumped 2.4%, leading to losses in heavyweight banks. Meanwhile, energy stocks outperformed the broader index and closed in the green, supported by a 0.9% rise in Eni Group, as EU officials expect Europe to replace two-thirds of Russia's energy imports by the end of the year. Italy's 10-year BTP bond yield fell to 3.5 percent, hovering near a two-week low hit on June 23, as fears of an economic slowdown reignited investors' preference for less risky assets. Demand for government bonds also rose after preliminary data showed Germany's headline inflation unexpectedly slowed in June, easing fears that the European Central Bank accelerated rate hikes in the third quarter. Meanwhile, investors continued to speculate on how well the ECB's new tool could prevent a split after the promise of higher interest rates sparked stark differences between member states' bond yields. As a result, the spread between the 10-year BTP and the Bundesbank narrowed further to below 2 points, reflecting the fall in the Italian debt premium.

-  Italy FTSE MIB index - D1, Resistance (consolidation) around ~ 23 469,  Support (consolidation) around  ~ 21 614

GLOBAL CAPITAL MARKETS OVERVIEW:   Europe's major stock indexes closed in negative territory on Wednesday, snapping a three-day winning streak, as recession fears dented risk sentiment again. Domestically, the Dax fell 1.7%, and the Stoxx 600 lost 0.7%, dragged by real estate, automakers, and industrials. On the economic data front, German inflation fell below expectations at 7.6% in June, down from 7.9% in May, in stark contrast to a forecast of 10.2% in Spain, which has not seen inflation since 1985. Meanwhile, business and consumer confidence indicators in the eurozone were mixed, with consumers and retailers turning more pessimistic, while sentiment among service providers and manufacturers unexpectedly improved. On the earnings front, H&M's second-quarter earnings were upbeat, rising 2.2%, reflecting a recovery in spending on low-cost apparel as consumers return to the office and socialize. The CAC 40 fell 0.9% to end at 6,031.48, erasing a rally from the previous session, as the central bank's determination to fight inflation reignited fears of slowing global growth, overshadowing concerns that China is gradually emerging from the coronavirus lockdown. The tech and auto sectors were the biggest losers. Renault fell 5.57%, and Stelantis fell 2.81%. Oufei Technology fell 4.93% among technology stocks, and Capgemini fell 3.26%. Commercial property stocks were also dragged down, with Unibail Rodamco Westfield leading losses (-4.1%) as European office stocks fell on a Bank of America analyst downgrade. Conversely, total energy rose 0.61% on higher crude oil prices and Bernstein's bullish rating. On Wednesday, the FTSE MIB index fell 1.2% to close at 21,830, still shaky as concerns over economic contraction resurfaced. The prospect of higher borrowing costs weighed on Milan's tech sector as STMicroelectronics shares fell 2.1%. Automakers also posted significant losses, with CNH Industrial and Stellantis down 4.3% and 2.8%, respectively, while UniCredit slumped 2.4%, leading to losses in heavyweight banks. Meanwhile, energy stocks outperformed the broader index and closed in the green, supported by a 0.9% rise in Eni Group, as EU officials expect Europe to replace two-thirds of Russia's energy imports by the end of the year. On Wednesday, all three major U.S. stock indexes lost initial momentum trading around horizontal lines as investors reassessed the prospect of tighter monetary policy amid slowing economic growth. A slew of recent U.S. economic data, including worse-than-expected GDP data and poor consumer confidence data, has lowered investors' expectations for a rate hike by the Federal Reserve. So far, however, the deteriorating growth outlook has not been enough to change the central bank's tightening policy. Several Fed policymakers, including Chairman Jerome Powell, have made a case for faster rate hikes to curb stubbornly high inflation, with markets now pricing in a 75-basis point hike in July. On the corporate front, Bed Bath & Beyond's shares fell more than 20% after the company failed to meet Wall Street expectations and announced the resignation of its chief executive. General Mills, on the other hand, rose 4% after beating earnings and revenue forecasts for the most recent quarter. According to the EIA's latest report, U.S. crude inventories fell by 2.762 million barrels in the week ended June 24, after falling by 386,000 barrels the previous week. Meanwhile, crude inventories at Cushing, Oklahoma, fell by 782,000 barrels, while gasoline inventories rose by 2.645 million. Distillate stockpiles, including diesel and heating oil, rose by 2.559 million barrels. Canada's main stock index, the S&P/TSX, traded sideways higher on Wednesday, with oil and gas stocks tracking crude futures higher amid tight global supplies. However, gains were capped by losses in heavyweight miners, driven by gold prices. Fall inhibition. In a company update, Exxon Mobil and Canadian partner Imperial said they would sell their Canadian assets in Montney and DuVernay to Whitecap Resources for $1.9 billion on Tuesday. Russia's MOEX-Russia index fell 1.1% to close at 2,381, extending yesterday's losses as investors focused on new Western measures against Russia. Financials were the biggest losers, with TCS Group and Sberbank down more than 5% and VTB shares down more than 3%. Mining stocks continued to slide after G7 leaders agreed to halt Russian gold imports. The ban added to low confidence in the industry as recession fears dented demand for the metal, and a surge in the ruble pushed up prices for importers. Shares in Norilsk Nickel fell 3.3 percent. Meanwhile, shares in Gazprom, which has continued to slash its gas exports to Europe despite soaring prices, have struggled. On Wednesday, the Shanghai Composite fell 1.4% to close at 3,362 points, while the Shenzhen Composite fell 2.2% to close at 12,697 points, down sharply from a nearly four-month high as investors continued to rally in mainland stock markets over the past two months. Profit-taking afterward. Tuesday's decline also offset gains from the previous session, when China announced it was easing quarantine requirements for incoming travelers in what analysts see as the biggest easing of its "zero-coronavirus" strategy so far, but the impact faded on Wednesday. Analysts believe that for the rally to continue, investors want to see the reopening continue on top of a more accommodative policy. Rising new energy and auto stocks led to losses, with Amperex (down 2.1%), Longi Green energy (down 5.1%), Tianqi Lithium (down 4.4%), BYD (BYD) (down 6%), and Chongqing Changan (down 10%) fell sharply. Japan Nikkei 225 lost 0.91% to end at 26,805, while the broader Topix index fell 0.72% to 1,894 on Wednesday, retreating from a two-week high, led by chip-related stocks. Japanese stocks also tracked overnight losses on Wall Street, as a drop in U.S. consumer confidence weighed on investor sentiment in June, underscoring the looming risk of a recession. The biggest losers in the technology sector were Tokyo Electron (-2.8%), Murata Manufacturing (-2.6%), Renesas Electronics (-3.6%), Filo Technology Holdings (-3.9%) and Sumec (-2.4%). Other index heavyweights also fell, including SoftBank Group (-1.6%), Kawasaki Keesen (-3.7%), Sony Group (-1%), Toyota Motor (-1.8%) and Inpex Corp (-2.8%). Meanwhile, domestic data reviewed by investors showed solid retail sales growth in May, while consumer confidence fell to an 18-month low in June. Australia S&P/ASX 200 fell 0.94% on Wednesday to close at 6700, retreating from a two-week high, tracking Wall Street's overnight losses as a drop in U.S. consumer confidence in June weighed on investor sentiment, highlighting a recession is looming risk. Gold stocks led losses on weaker prices, with Newcrest Mining (down 3.7%), Northern Star Resources (down 5.5%), and Evolution Mining (down 6.6%) falling sharply. Tech and clean energy-related names also fell, including auto sales. com (down 12.1%), Xero (down 4.4%), Block Inc (down 6.2%), Pilbara Minerals (down 3.4%), Lynas Rare Earth (down 4.8%) and Lake Resources (down 4.6%). Meanwhile, shares of Liontown Resources rose 5.6% after the company said it signed a lithium supply deal with Ford Motor Co. Elsewhere, data reviewed by investors showed Australian retail sales rose a solid 0.9% in May from April. New Zealand NZX 50 fell 0.54%, or 59.81 points, to settle at 10,958.81 on Wednesday, reversing gains from the previous three sessions and retreating from a nearly two-week high, as Wall Street endured a rough day on Tuesday, with the S&P 500 down more than 2 %, after news that U.S. consumer confidence fell to a 16-month low in June amid concerns that high inflation could lead to a sharp slowdown in the economy in the second half of 2022. Meanwhile, Reuters said Washington placed five Chinese companies on a trade blocklist on Tuesday for allegedly supporting Russian troops. Locally, the soaring cost of living is being felt in all parts of New Zealand as the Covid-19 outbreak continues, domestic media cites a consumer confidence survey. Notable decliners were Chatham Phosphate Rock (down 11.5%), Savor Ltd (down 7%), Smart Payments Holdings Ltd (down 6%), and Travel Holdings Ltd (down 3.9%). REVIEWING ECONOMIC DATA:  Looking at the last economic data: - RU: In April 2022, real wages in Russia fell 7.2% year-on-year after rising by 3.6% in the previous month, a decline exceeding the market expectation of 6.0%. It was the first drop in real wages since April 2020, but it was also the most significant drop since 2015. In addition, the average nominal wage increased by 9.4% year-on-year to 62,269 rubles. - RU: Russian industrial output fell 1.7% in May 2022 from a year earlier, after falling 1.6% in the previous month, well below market expectations of 5.4%. It was the second and worst decline in industrial activity since February last year, reflecting a decline in manufacturing output (3.2% in April, down 2.1% in April), a drop in mining (0.8%, down 1.6% in April), %), the water and sewage industry declined (4.4%, 8.0%). On the other hand, electricity and gas supply output grew faster (4.0% vs. 2.0%). As a result, industrial production edged down 0.2% after falling 1.9% in the previous month on a seasonally and calendar-adjusted monthly basis. - RU: Russia's unemployment rate unexpectedly edged to a record low of 3.9% in May 2022, down from 4.0% in the previous month, while market expectations were for 4.5%. The number of unemployed fell by about 100,000 from the last month to 2.9 million, while the employment rate rose to 59.8% from 59.7% in April, although employment was little changed at 71.9 million. - US:  Federal Reserve Chairman Jerome Powell reiterated the central bank's commitment to do everything in its power to rein in high inflation, saying the more significant risk is that price stability won't be restored. Powell also noted at the European Central Bank's annual meeting that the U.S. economy is in good shape and well-positioned to withstand tighter monetary policy. He hopes growth will remain optimistic despite the risk that growth will slow more than needed. He also confirmed that the Fed is raising rates quickly and intends to enter restrictive territory soon. At its June 2022 meeting, the Fed raised the fund's speed by 75 basis points to 1.5%-1.75%, instead of the 50 basis points initially expected. Meanwhile, several Fed officials have advocated for a quick rate hike to bring inflation back to its 2 percent target. A rise of 75 or 50 basis points is expected in July. - US: U.S. corporate profits fell 4.9% to $2.40 trillion in the first quarter of 2022, after rising 0.2% in the previous quarter and a preliminary estimate of a 4.3% decline. The company's internal funds available to invest -- inventory valuation-adjusted net cash flow fell 2.2% to $3.16 trillion, while net dividends rose 0.8% to $1.48 trillion. Meanwhile, retained earnings fell 12.8% to $0.93 trillion. - US: In the first quarter of 2022, the U.S. economy contracted at an annualized rate of 1.6% quarter-on-quarter, slightly lower than the second forecast of 1.5%. It was the first contraction since the 2020 pandemic-induced recession, as record trade deficits, supply constraints, worker shortages, and high inflation weighed on the economy. Imports surged more than expected (18.9% vs. 18.3% in the second estimate), led by non-food and non-auto consumer goods, while exports fell less (-4.8% and -5.4%, respectively). In addition, consumer spending growth was revised down (1.8% vs. 3.1%) as increases in services spending led by housing and utilities were partially offset by lower spending on goods (i.e., groceries and gasoline). Meanwhile, private inventories shrank by 0.35 percentage point growth, well below the 1.09 percentage point drag in the second assessment. Fixed asset investment growth remained strong (7.4%), but housing investment slowed (0.4%, same as the second estimate). - GE: Preliminary estimates show annual German inflation slowing to 7.6% in June 2022 from 7.9% in May, the highest level since Germany's reunification. Those figures compared with market forecasts of 8% as the government took steps to curb high oil prices from June 1, including tax cuts on petrol and diesel, which came into effect. Energy prices rose 38% in May, slightly less than 38.3%, while food prices rose 12.7% from 11.1% the previous month. Compared with the last month, consumer prices edged up 0.1%, the lowest level in seven months. The EU flat rate has also slowed, with the annual flat rate falling from 8.7% to 8.2% and the monthly flat rate to -0.1%, the first drop in CPI since November 2020. German data for June raised hopes that inflation across the eurozone has finally peaked and will soon start to slow. - EU: In June 2022, the Eurozone Consumer Confidence Index fell to -23.6, the lowest level since April 2020, in line with preliminary estimates. Households' outlook on future financial wellbeing hit a record low, with assessments of past financial wellbeing falling to a nine-year low. At the same time, their willingness to buy commodities and expectations for the general economic situation has fallen to levels not seen since the recovery from the coronavirus pandemic. - EU: In June 2022, the Eurozone Services Confidence Index unexpectedly rose to 14.8 from 14.1 in May, the highest level since November. That compares with a market forecast of 12.5, with managers more optimistic about business over the past three months but less optimistic about the future. - EU: The Eurozone Industrial Confidence Index unexpectedly rose to 7.4 in June 2022 from 6.5 in May, beating consensus forecasts of 4.6. Manufacturers are more optimistic about future production and orders but less confident about employment, with more significant uncertainty overall. - EU: The Eurozone Economic Confidence Index (ESI) fell to 104 in June 2022, the lowest level since March last year, compared to expectations of 103. Sentiment deteriorated among retailers (5.1 vs. -4.2), consumers (23.6 vs. -21.2), and builders (3.7 vs. 6.3) as the prospect of high prices and rising interest rates weighed on the industry (7.4 vs. 6.5) and service providers ( 14.8 vs. 14.1) but improved. Meanwhile, the Economic Uncertainty Index (EUI) rose to 24.8 from 23.4, and the Employment Expectations Index (EEI) fell to 110.9 from 112.6. Sentiment decreased in the five-euro zone economies, with the Netherlands (down 3.6), Germany (down 1.9), and Spain (down 1.9) showing the most notable performances. - AU: Lightning readings show Australian retail sales rose 0.9 percent month-on-month in May 2022 to another record level of A$34.23 billion, beating the consensus forecast of 0.4 percent and following a final 0.9 percent increase in April. It was also the fifth consecutive month of growth as the economy recovered further from the ravages of the 2019-nCoV disease. Department stores rose the most, up 5.1%, followed by cafes, restaurants, and takeaway food services (1.8%), other retail (1.5%), food retail (0.6%), and homeware retail (0.4%). Retailing apparel, footwear, and personal accessories were the only sector to decline, falling 1.4% after three months of gains. Among states and territories, New South Wales (1.6%), South Australia (1.9%), Victoria (1.1%), Western Australia (0.2%), Tasmania (1.1%), and Northern Sales in the Territory (0.6%) increased. In contrast, sales in Queensland fell 0.4 percent in April, driven by tourism, while sales in the Australian Capital Territory fell 0.3 percent. - JP: Retail sales in Japan rose 3.6% year-on-year in May 2022, beating consensus estimates of 3.3%, after rising 3.1% the previous month. The latest figures mark the third consecutive month of retail growth and the fastest growth since May 2021, as general merchandise sales rose sharply (20.7%) thanks to the government's lifting of all Covid-19 restrictions. 8% vs. April), while sales of textiles, apparel and accessories grew faster (11.8% vs. 9.7%), fuels (15.0% vs. 11.8%) and pharmaceuticals and cosmetics (5.0% vs. 3.0%), other products Sales increased further (8.6% vs. 9.7%). In contrast, food and beverage sales fell 0.2% after rising 0.5% in April, while machinery and equipment sales fell 3.3% after rising 0.8% in April. Meanwhile, motor vehicle sales fell for the ninth consecutive month (down 10.1% and 7.5%, respectively). Retail sales rose 0.6% month-on-month in May, the third straight monthly gain. - SK: In June 2022, South Korea's Composite Consumer Confidence Index (CCSI) fell 6.2 percentage points from the previous month to 96.4, the lowest level since January 2021. Perceptions of current living standards (87 to 89), prospects (88 to 93), future economic conditions (69 to 84), and future household income (97 to 98) worsened. Meanwhile, households' inflation expectations for the year ahead rose to 3.9% from 3.3%, the highest level since April 2012. LOOKING AHEAD:    Today, investors will receive: - USD: Core PCE Price Index m/m, Unemployment Claims, Personal Income m/m, Personal Spending m/m, Chicago PMI, and Natural Gas Storage. - EUR: German Import Prices m/m, German Retail Sales m/m, French Consumer Spending m/m, French Prelim CPI m/m, German Unemployment Change, Italian Monthly Unemployment Rate, Unemployment Rate, and Italian 10-y Bond Auction. - GBP: Current Account, Final GDP q/q, Nationwide HPI m/m, and Revised Business Investment q/q. - JPY: Prelim Industrial Production m/m, and Housing Starts y/y. - NZD: ANZ Business Confidence, and RBNZ Statement of Intent. - CNY: Manufacturing PMI and Non-Manufacturing PMI. - CHF: Retail Sales y/y, and KOF Economic Barometer. - AUD: Private Sector Credit m/m. - CAD: GDP m/m. - All: OPEC-JMMC Meetings. KEY EQUITY & BOND MARKET DRIVERS: - IT: Italy's 10-year BTP bond yield fell to 3.5 percent, hovering near a two-week low hit on June 23, as fears of an economic slowdown reignited investors' preference for less risky assets. Demand for government bonds also rose after preliminary data showed Germany's headline inflation unexpectedly slowed in June, easing fears that the European Central Bank accelerated rate hikes in the third quarter. Meanwhile, investors continued to speculate on how well the ECB's new tool could prevent a split after the promise of higher interest rates sparked stark differences between member states' bond yields. As a result, the spread between the 10-year BTP and the Bundesbank narrowed further to below 2 points, reflecting the fall in the Italian debt premium. - US: U.S. stock futures, which track the broader market, pared early losses into positive territory on Wednesday as investors reassessed the prospect of tighter monetary policy amid slowing economic growth. A recent flurry of data on the U.S. calendar, including worse-than-expected first-quarter GDP data, lowered investors' expectations for how much the Fed will raise interest rates as borrowing costs are expected to exacerbate a possible recession. Market participants will now pay close attention to the ECB forum, with Federal Reserve Chairman Jerome Powell scheduled to speak later in the day. In regular trading on Tuesday, the Dow was down 1.56%, the S&P 500 was down 2.01%, and the Nasdaq Composite was down 2.95%. All three major U.S. benchmarks rebounded earlier in the session after disappointing consumer confidence readings before giving up those gains. - GE: German 10-year bond yields fell further to 1.57% at the end of June, as lower risk sentiment boosted demand for government bonds. However, an unexpected slowdown in domestic inflation eased fears of faster ECB tightening. Preliminary data showed that Germany's CPI rose 7.6% year-on-year in June, well below market expectations of 8%, and down from a record 7.9% in May. At the European Central Bank's annual forum, President Lagarde said the central bank would accelerate the pace of tightening in the third quarter if the inflation outlook remains high while confirming a 25-basis point hike in July, despite calls from other policymakers for a more aggressive rate hike. The ECB will also roll out new tools to avoid a split among member states, as promises of higher borrowing costs led to an uneven fall in bond prices earlier this month. - AU: Australia's 10-year government bond yield fell to 3.7 percent, hovering at its lowest level in nearly three weeks and line with global yields, as recession fears led investors to seek the safety of government bonds. Meanwhile, domestic retail sales hit a record high in May, bolstering the Reserve Bank of Australia's confidence that the Australian economy can withstand higher interest rates. As a result, the central bank is expected to continue raising the cash rate in July, after the most significant rate hike in 22 years in June. - UK: On Wednesday, the FTSE 100 futures contract fell nearly 0.7% to close at its highest level in more than two weeks, tracking negative global cues from its Asian and European counterparts. The previous day, markets returned to caution and volatility after a sharp sell-off on Wall Street on weak economic data and fresh recession fears. Meanwhile, traders will keep an eye on the ECB's forum when ECB President Christine Lagarde, Federal Reserve Chair Jerome Powell, and Bank of England Governor Bailey are due to speak. STOCK MARKET SECTORS: - High: Consumer Staples, Health Care, Information Technology, Communication Services. - Low: Real Estate, Industrials, Materials, Energy, Financials. TOP CURRENCY & COMMODITIES MARKET DRIVERS:  - OIL: U.S. crude inventories fell by 2.762 million barrels in the week ended June 24, after falling by 386,000 barrels the previous week, according to the EIA's latest report. Meanwhile, crude inventories at Cushing, Oklahoma, fell by 782,000 barrels, while gasoline inventories rose by 2.645 million. Distillate stockpiles, including diesel and heating oil, rose by 2.559 million barrels. - EUR: The euro held steady at $1.05 at the end of June, near a five-year low of $1.04 hit in May, due to differences in the monetary policies of the European Central Bank and the Federal Reserve. Bets for the European Central Bank to raise interest rates faster in the third quarter eased as preliminary German inflation data came in below expectations and slowed from a record high in May. Meanwhile, President Lagarde confirmed interest rates at 25 basis points for July, pulling back uncertainty after multiple ECB policymakers called for a sharp hike. Conversely, Cleveland Fed President Mester backed a 75 basis point rate hike at the Fed's next meeting, as current conditions suggest inflation is still on an upward trend after the U.S. core PCE hike. - CNY: The offshore yuan fell to around 6.70 per dollar, although Beijing's decision to ease quarantine requirements for incoming passengers supported expectations of a faster economic recovery. The yuan has come under pressure from differences in monetary policy, with People's Bank of China Governor Yi Gang saying China's policy stance will remain accommodative to support economic recovery. Those contrasts sharply with the hawkish tendencies of other major central banks, raising fears of increased capital outflows and further currency weakness. Analysts, however, don't expect the yen to depreciate as much as the yen as long as the People's Bank of China does not resort to the Bank of Japan-style ultra-loose easing. - RUB: The Russian ruble touched a seven-year high of 47.75 roubles per dollar in late June before falling back to 51 roubles as a massive month-end inflow of taxes exacerbated Russia's huge trade imbalance and remaining capital controls. Commodities exports to Asia at soaring prices have kept the ruble strong despite European efforts to limit Russian energy and commodity purchases. In addition, the collapse in import activity due to sanctions halted domestic demand for dollars, exacerbating high fees and negative interest rates for banks’ deposits in currencies of “unfriendly” countries. A Russian sovereign bond default has put slight pressure on the rouble's momentum after Western sanctions blocked financial institutions from processing interest payments on $100 million of Eurobonds due in May. While Russia's economy is increasingly isolated from the West, the ruble has appreciated, making it the best-performing currency this year. CHART OF THE DAY: On Wednesday, the FTSE MIB index fell 1.2% to close at 21,830, still shaky as concerns over economic contraction resurfaced. The prospect of higher borrowing costs weighed on Milan's tech sector as STMicroelectronics shares fell 2.1%. Automakers also posted significant losses, with CNH Industrial and Stellantis down 4.3% and 2.8%, respectively, while UniCredit slumped 2.4%, leading to losses in heavyweight banks. Meanwhile, energy stocks outperformed the broader index and closed in the green, supported by a 0.9% rise in Eni Group, as EU officials expect Europe to replace two-thirds of Russia's energy imports by the end of the year. Italy's 10-year BTP bond yield fell to 3.5 percent, hovering near a two-week low hit on June 23, as fears of an economic slowdown reignited investors' preference for less risky assets. Demand for government bonds also rose after preliminary data showed Germany's headline inflation unexpectedly slowed in June, easing fears that the European Central Bank accelerated rate hikes in the third quarter. Meanwhile, investors continued to speculate on how well the ECB's new tool could prevent a split after the promise of higher interest rates sparked stark differences between member states' bond yields. As a result, the spread between the 10-year BTP and the Bundesbank narrowed further to below 2 points, reflecting the fall in the Italian debt premium. -  Italy FTSE MIB index - D1, Resistance (consolidation) around ~ 23 469,  Support (consolidation) around  ~ 21 614