GLOBAL CAPITAL MARKETS OVERVIEW:  

On Thursday, Wall Street closed in negative territory, with the Dow down 253 points, the S&P down 0.9%, and the Nasdaq underperforming with a 1.1% loss due to persistently high inflation and a longer-than-expected tightening cycle. The threat of looming and lingering concerns about a worsening growth outlook. On the data front, core PCE price index inflation, the Fed's preferred measure of inflation, eased after falling to a six-month low of 4.7% in May 2022. All three major indexes posted sharp monthly and quarterly losses, with tech stocks being hit especially hard. In the first half of the year, the Dow and S&P 500 had their worst performances since 1962 and 1970, respectively, while the Nasdaq was on track for its worst half-year performance. Stagflation and the risk of aggressive rate hikes drove much of the stock market sell-off in the first half, with the coronavirus outbreak in China and Russia's invasion of Ukraine adding to volatility. Canada's main stock index, the S&P/TSX, closed down 1.1%, or 217 points, at 18,861 on Thursday, with all sectors in the red, led by healthcare (-4.1%), followed by materials (-3.6%), technology sectors (down 1.7%) and oil and gas (down 1.1%). At the bottom of the index, pot company Canopy grew 18.5% lower after the company reached an agreement with Constellation Brands Inc to convert about $198 million of convertible debt into stock. Also, commodity-linked stocks have come under pressure from the recession as crude oil futures, and metals prices fell. Meanwhile, investors digested weak preliminary data that output contracted 0.2% in May, adding to growth concerns. In the first half of 2022, the TSX was down about 11.1%, largely due to an 11.8% plunge in the second quarter.On Thursday, the MOEX index tumbled 7.3% to close at 2,205, its lowest level in more than two months, as Gazprom's dividend withdrawal sparked a sharp sell-off in Russian stocks. It was the most high-profile cancellation of dividend payments since sweeping Western sanctions made the phenomenon common, sparking contagion across all sectors of the session. Shares in the state-owned giant plunged 30 percent after withdrawing a previously announced record dividend of 52.53 rubles a share, sparking a rally that has significantly outperformed broader indexes and is close to pre-invasion levels. The board said the current situation was unsuitable for for-profit distribution as the company had to reinvest its resources for the winter. Gazprom's earnings are expected to remain strong as soaring gas prices generate record revenue in 2021, even as Gazprom slashed exports to Europe. European stocks fell sharply on the last trading day of June, with Frankfurt's DAX down 1.7% to close at its lowest level since November 2020 and the Stoxx 600 down 1.6%, with all sectors in negative territory. Stocks continued to fall as central banks tasked with reducing inflation from historically high levels have raised concerns that central banks will push their economies into recession. In contrast, the ongoing war in Ukraine continues to pose problems for commodity supplies. Meanwhile, shares in German energy company Uniper fell 14.4% after it withdrew its 2022 financial outlook due to gas supply constraints from Gazprom. Year-to-date, in its worst first semester since the Great Recession in 2008, the DAX fell 19.5%, and the Stoxx 600 fell 16.6%, its worst quarterly performance since the onset of the pandemic in early 2020, with both Both indexes falling about 9%. The CAC 40 index fell 1.8 percent to end at 5,922.86, extending losses for a third session, as new high domestic inflation data fueled fears of tighter monetary policy and a possible recession. Banks and cyclical stocks were the most affected. The president of the European Central Bank announced today that commercial banks would factor in rising interest rates when calculating their robustness, as the ECB raises interest rates for the first time in 11 years in July. Societe Generale, the most vulnerable of all banks, fell 6.28%. Elsewhere, shares in Renault fell 2.6%, and debt-ridden Alstom fell 8.11% on credit risk concerns. For the month, the CAC 40 fell 8.44%, its biggest drop since March 2020, and plunged 11% in June's quarter. FTSE MIB index fell 2.5% to close at 21,295 after falling 16.2% in the second quarter to a 17-month low as investors grew increasingly concerned about the possibility of a recession. Confidence in Italy's political stability has also been dented by Prime Minister Mario Draghi's departure from a NATO summit to resolve political issues in Rome after Foreign Minister Di Maio left and split the 5 Star Movement. Milan's heavyweight banking sector fell 3.7% on average, with Italy's two largest lenders, Intesa Sanpaolo and UniCredit, falling more than 5%. Meanwhile, reports have suggested that the Italian government will pass a new energy aid package worth 8 billion euros in response to a surge in utility prices caused by cuts in Russian gas supplies. On the data front, Italy's unemployment rate fell below expectations at 8.1% in May, the lowest since the pandemic's start, while producer prices continued to fall. The Hang Seng index fell 0.6% on Thursday to close at 21,860, the technology index fell 1.4%, and the China Enterprises index fell 0.4%. Tencent Holdings was among the worst performers (-2.9%) after major Dutch shareholder Prosus announced plans to cut its stake in WeChat operator Tencent. Considering June, the Hang Seng Index rose 2%, its best monthly performance since October. In the second quarter, however, Hong Kong stocks fell 0.6%. New Zealand NZX 50 fell 90.11 points, or 0.82%, to settle at 10,868.70, its lowest close in a week, extending losses from the previous session and plunging 4.7% this month amid growing concerns about rising interest rates and inflation. An intensification could weaken economic momentum. The U.S. economy contracted more than expected in the first quarter as consumer spending was revised sharply. Traders continued to avoid riskier assets as New Zealand business sentiment fell to a 26-month low in June. In China, factory activity and the services sector rose for the first time in four months in June. However, headwinds remained, including a still-sluggish housing market, weak consumer spending, and concerns about a resurgence of virus infections. Shares in fleet management company Broad fell to a record low after its former chief executive abruptly quit the company in April. Other notable losers included Harmoney Corp (down 8.9%), ArborGen Holdings (down 6.7%), and Hamburg Fuel Group (down 4.8%). On Thursday, the Shanghai Composite rose 1.1% to close at 3,399. The Shenzhen Composite rose 1.6% to 12,896, near its highest level in nearly four months, as China's economy showed signs of improvement amid the easing of the coronavirus outbreak. . In June, China's manufacturing and services sectors expanded for the first time in four months as authorities gradually lifted virus restrictions and resumed production and consumption. The benchmark index also posted its biggest monthly gain in nearly two years, buoyed by expectations that Chinese policy will become more accommodative to support the economic recovery. Growth-oriented tech and new energy stocks led gains, with strong gains from TCL Central (10%), Orient Currency (2.2%), Wingtech Technology (8.2%), Tianqi Lithium (1.6%), and Longi Green Energy (3.9%). Consumer, tourism, and manufacturing stocks also rose in hopes that the economy would continue to reopen. The Nikkei 225 fell 1.54% to close at 26,393. The broader Topix index fell 1.2% to close at 1,871 on Thursday, extending losses from the previous session as investors factored in the rising risk of a global recession Inside as major central banks aggressively hike interest rates to combat soaring inflation. The data also showed that Japan's industrial production fell 7.2% in May, well below the consensus forecast of 0.3%, which analysts said could be affected by China's lockdown. Technology stocks led losses, with SoftBank Group (-1.7%), Tokyo Electron (-4.1%), and Renesas Electronics (-3.9%) falling sharply. Other index heavyweights also fell, including Sony Group (down 3.4%), Mitsubishi UFJ (down 1.6%), and Tokyo Electric Power (down 2.1%). Elsewhere, shares in Toyota fell 1.1% after the company missed its monthly production target for the third straight month in May. The benchmark index fell this month. Australia S&P/ASX 200 index fell 1.97% on Thursday to close at 6568, marking its worst month since March 2020, after falling 8.92% in June on concerns that aggressive monetary tightening by major central banks could lead to the global economy has plunged into recession, with technology- and commodity-intensive exchanges being particularly hard hit. Federal Reserve Chairman Jerome Powell underscored that concern, saying the U.S. central bank's rate hikes slowed the economy too much, but the bigger risk was persistent inflation. Mining and gold stocks led losses on Thursday, led by weaker metals prices, with BHP Group (down 3.5%), Fortescue Metals (down 4.7%), Rio Tinto (down 3.3%) %), Newcrest Mining (down 2.8%), and Northern Star Resources (down 2.7%). Energy companies also fell on weaker oil prices, including Woodside Energy (down 3%), Santos Ltd (down 1.6%), and Beach Energy (down 3.6%). Elsewhere, tech, financials, and consumer stocks mostly fell, while healthcare companies outperformed the market.

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- US: The rout in U.S. stocks subsided in Thursday afternoon trade but remained down 1% as concerns over deteriorating growth prospects under the threat of persistently high inflation and a longer-than-expected tightening cycle played a role. Otherwise, it could tip the economy into recession. On the data front, core PCE price index inflation, the Fed's preferred measure of inflation, eased after falling to a six-month low of 4.7% in May 2022. All three major moving averages are also set for sharp monthly and quarterly declines, with tech stocks being hit especially hard. In the first half of the year, the Dow and S&P 500 had their worst performances since 1962 and 1970, respectively, while the Nasdaq was on track for its worst half-year performance. Runaway inflation, aggressive interest rate hikes, and recession risks drove much of the stock market sell-off in the first half, with volatility caused by China's Covid-19 lockdown and Russia's invasion of Ukraine.

- US: In May 2022, the U.S. personal consumption expenditures price index rose 0.6% month-on-month, up from 0.2% in April. However, the annual rate remained unchanged at 6.3% after hitting a record 6.6% in March. Energy prices rose 35.8% (30.4% in April), while food inflation accelerated to 11% from 10%. Excluding food and energy, personal consumption expenditures inflation fell to 4.7% from 4.9%, below expectations for 4.8%.

- US: In a sign of tight labor conditions, new U.S. jobless claims fell by 2,000 to 231,000 in the week ended June 25, compared with a market forecast of 228,000. On a non-seasonally adjusted basis, initial jobless claims increased by 1,060 from the previous week to 207,421, with New Jersey (up 5,471), Massachusetts (up 3,152), and Ohio (up 2,472) ) and Kentucky (+1.501) seeing notable increases. The 4-week moving average is 231,750, an increase of 7,250 from last week's upwardly revised average.

- US: U.S. personal spending edged up 0.2% month-on-month in May 2022, the slowest gain this year, after a downwardly revised 0.6% gain in April. The data was below market forecasts of 0.4%. Spending on services increased, i.e., housing, international travel, hospital services, and gasoline, while spending on cars and parts decreased, i.e., new vehicles. Real or inflation-adjusted personal spending fell 0.4%, the first decline this year, a sign that persistently high consumer prices are starting to weigh on households' affordability.

- US: In May 2022, U.S. personal income rose 0.5% from the previous month, unchanged from the last month, in line with market expectations, as increases in wages and homeowners offset declines in government social benefits. In terms of compensation, the increase reflects increases in private and government wages and salaries. The rise in owner income was mainly non-farm income. The decline in government social benefits primarily reflects a decrease in transfers to nonprofit health care providers through the Provider Relief Fund, partially offset by increases in Medicaid and Medicare.

- CA: The Canadian Financial Investment Council's (CFIB) Business Barometer's Long-Term Optimism Index, based on a 12-month outlook, fell nearly three points to 59.4 in June 2022, the lowest level since January and the third straight monthly decline. Optimism has deteriorated across all sectors, except natural resources, financials, and real estate, which have seen little change.

- HK: Retail sales in Hong Kong fell 4.9% year-on-year in May 2022, compared with an 8% drop in April. Sales in supermarkets and department stores fell sharply (8.4% and 2.3%, respectively), while department stores recorded sales of 6.4% and 8.4%, respectively. The hardest-hit stores were consumer durables (down 11.4% and 28.3%, respectively); and apparel, footwear, and related products (down 7.6% and 1.9%, respectively). In addition, sales of food, alcoholic beverages and tobacco continued to decline (-2.9% and -1.5%, respectively); fuel (-12.1% and -11.5%, respectively), while jewelry, watches, and valuables (3.1%, respectively) and 6.5%). Looking ahead, however, the government confirmed that the retail sector should continue to recover as long as the local outbreak is contained.

- EU: The eurozone unemployment rate edged from 6.7% in April to a new record low of 6.6% in May 2022, compared with market forecasts of 6.8%. 11.04 million were unemployed, of which 1.988 million were young people under 25. The unemployment rate for women fell from 7.2% to 7.1%, and the unemployment rate for men fell from 6.3% to 6.2%. Unemployment has been falling since early 2021 as economies rebound from the hit of the pandemic, but rising inflation and interest rates are expected to slow the recovery.

- GE: Germany's seasonally adjusted unemployment rate rose to a seven-month high of 5.3% in June 2022 after remaining at the pre-pandemic level of 5% for the third straight month in May. This increase is due to Ukrainian refugees registering with the Labour Office in search of work. However, the head of the Federal Labour Office, Detlef Scheele, said that "the overall labor market remains stable."

- GE: Germany's seasonally adjusted number of unemployed roses by 133,000 to 2.417 million in June 2022, compared with market forecasts for a drop of 6,000. It was the first rise in unemployment since February last year and the most significant increase since May 2020 as Ukrainian refugees registered at employment centers. Adjusted for these effects, however, the unemployment rate held steady, even as demand for new workers softened. Meanwhile, the unemployment rate rose to 5.3% from 5%, the lowest level since March 2020.

- SK: In May 2022, South Korean industrial production rose 7.3% year-on-year, up from 3.5% in April and beating expectations for a 3.1% increase. The seasonally adjusted monthly data showed that industrial output rose 0.1% in May, rebounding from a 3.3% slump in April. Asia's fourth-largest economy maintained its modest recovery amid heightened external uncertainty. Latest signs. The statistics agency said the rebound in industrial output in May was led by robust service sector production and increased investment in facilities and construction. "Production of semiconductor-related equipment has suffered setbacks due to disruptions in the supply of components. Investment rebounded last month as these issues were resolved," Eo Woon sun, a senior official at Statistics Korea, told reporters.

- SW: Sweden's central bank (Sveriges Riksbank) raised its benchmark interest rate by 50 basis points to 0.75% in June 2022, in line with market expectations, and said it would raise rates further this year. The executive committee also decided to reduce asset holdings faster in April. The decision came by a surprise 25 basis points at the central bank's last meeting, as policymakers sought to offset price spikes and prevent higher inflation from becoming entrenched in price and wage settings. The year-end benchmark interest rate forecast was raised and is expected to be close to 2%. Meanwhile, inflation is forecast to average 7.6% in 2022 and 7.1% in 2023, compared with previous forecasts of 6% and 5%. Under current projections, inflation is expected to normalize to 2% by the second quarter of 2025.

LOOKING AHEAD:   

Today, investors will receive:

- USD: Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending m/m, ISM Manufacturing Prices, and Wards Total Vehicle Sales.

- EUR: French Gov Budget Balance, Spanish Manufacturing PMI, Italian Manufacturing PMI, French Final Manufacturing PMI, German Final Manufacturing PMI, Final Manufacturing PMI, CPI Flash Estimate y/y, Core CPI Flash Estimate y/y, and Italian Prelim CPI m/m.

- GBP: Final Manufacturing PMI, M4 Money Supply m/m, Mortgage Approvals, and Net Lending to Individuals m/m.

- JPY: Tokyo Core CPI y/y, Unemployment Rate, Tankan Manufacturing Index, Tankan Non-Manufacturing Index, and Final Manufacturing PMI.

- NZD: Building Consents m/m.

- AUD: AIG Manufacturing Index, and Commodity Prices y/y.

- CNY: Caixin Manufacturing PMI.

- CHF: Manufacturing PMI

KEY EQUITY & BOND MARKET DRIVERS:

- US: U.S. 10-year Treasury yields fell below the 3% mark, retreating to levels not seen in three weeks, as investors scrambled for safe-haven assets amid persistent concerns that the Federal Reserve will hurt the U.S. economy as it tries to rein in inflation into recession. Those concerns were further exacerbated by weak economic data this week, namely signs of slowing consumer spending, with consumer morale at a 16-month low and GDP data below expectations. On the other hand, core PCE price index inflation, the Fed's preferred measure of inflation, fell to a six-month low of 4.7% in May 2022, suggesting price gains may be slowing. Still, borrowing costs are expected to increase by 11 basis points this month as Fed officials reiterated their determination to rein in inflation, with a 75-basis-point rate hike scheduled in July.

- US: U.S. stock futures pared some of their early losses as investors reacted positively to an inflation report that showed annual core PCE inflation rose less than expected. The Fed's preferred measure of inflation fell to a six-month low of 4.7%, signaling a possible slowdown in price gains and sparking speculation the central bank may be letting go. Still, the S&P 500 is set for its worst first half since 1970, amid persistent concerns about the impact of soaring inflation and tighter monetary policy on the growth momentum. All three major moving averages are also set for sharp monthly and quarterly declines, with tech stocks being hit especially hard. Runaway price growth, aggressive rate hikes, and recession risks drove much of the stock market sell-off in the first half, with volatility further exacerbated by the coronavirus outbreak in China and Russia’s invasion of Ukraine.

- FR: French 10-year oat futures yielded below 2 percent, near a three-week low of 1.9 percent hit on June 24, as investors turned to safer securities amid fresh fears of an economic contraction. Domestic inflation figures for June came in slightly above market expectations. They would hit a 37-year high, adding pressure on risky assets as the European Central Bank tightens policy in July. At the Bank of Portugal's annual forum, President Lagarde said that the pace of policy drawing for the rest of the third quarter largely depends on how inflation expectations develop. In addition, traders continued to await details on the ECB's new tool and how it will affect bond yield spreads between member states of the eurozone. According to the latest estimates, INSEE expects the French economy to expand by 0.2% in the second quarter and by 0.3% in the third and fourth quarters after contracting by 0.2% in the first quarter.

STOCK MARKET SECTORS:

- High: Utilities, Industrials, Real Estate.

- Low: Consumer Discretionary, Financials, Communication Services, Information Technology, Materials.

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- RUB: The Russian ruble fell to 54 rubles per dollar from a seven-year high of 47.75 hit on June 29, as capital controls eased and government efforts to devalue the ruble. The CBR raised the limit for cross-border money transfers from $150,000 to $1 million. Meanwhile, Russia's finance minister said Russia might start buying foreign currency from "friendly countries" to offset a sharp rise in the ruble. Still, this year, the ruble is the world's best-performing currency so far, helped by large trade imbalances and persistent capital controls. Commodities exports to Asia at soaring prices have kept demand for the ruble strong despite European efforts to limit purchases of Russian energy and commodities. In addition, the collapse in import activity due to sanctions halted domestic demand for dollars, exacerbating high fees and negative interest rates on deposits by banks in currencies of “unfriendly” countries.

- EUR: The euro fell to the $1.04 mark, near a five-year low of $1.035 hit in May, on heightened demand for the safety of the dollar and monetary policy differences between the European Central Bank and the Federal Reserve. Investors' appetite for a safer U.S. dollar has grown as fears of an energy crisis in Europe threaten the eurozone economy ahead of winter. European Central Bank President Christine Lagarde said she thought the eurozone would unlikely return to a low-inflation environment, denting confidence in the euro. Earlier, the ECB president had confirmed a 25-basis point rate hike in July after several ECB policymakers called for a short walk. Conversely, Cleveland Fed President Mester supports a 75-basis point rate hike at the Fed's next meeting if economic conditions remain unchanged.

- USD: The U.S. dollar index remained above 105 on Thursday, hovering near a 20-year high of 105.79 hits in mid-June, as global recession fears bolstered demand for the greenback’s safety, while a hawkish Federal Reserve also supported the greenback. Data in May showed the core PCE price index, the Fed's preferred measure of inflation, rose at an annual rate of 4.7%, reflecting further deceleration but remained stubbornly high. At the European Central Bank's annual forum, Chairman Jerome Powell said that while demand destruction could lead to an economic slowdown, bringing inflation back to healthy levels was essential. Meanwhile, Cleveland Fed President Mester said she would advocate for another 75-basis point rate hike in July if economic conditions remain intact. The DXY is set to appreciate 7.2% in the second quarter of this year as the Fed hiked rates by 150 basis points since its March meeting.

- CNY: The offshore yuan held steady at around 6.70 per dollar and was almost flat at the end of the month, as China's economy showed signs of improvement as the coronavirus outbreak eased. In June, China's manufacturing and services sectors expanded for the first time in four months as authorities gradually lifted virus restrictions and resumed production and consumption. Meanwhile, investors are wary of China sticking to a strict zero-coronavirus policy amid concerns that the country remains vulnerable to a lockdown. In addition, Yi Gang, governor of the People's Bank of China, said China's policy stance would remain accommodative to support economic recovery. Those contrasts sharply with the hawkish tendencies of other major central banks, raising concerns about capital outflows and currency weakness.

- JPY: The yen hit 137 yen against the dollar for the first time since September 1998 before recouping some losses as Japan's monetary policy diverged sharply from other major economies. The Bank of Japan remains the only major central bank to maintain an ultra-easy policy as other significant economies race to raise interest rates to curb soaring inflation. As widely expected, the Bank of Japan kept its key short-term interest rate unchanged at -0.1% and the 10-year bond yield around 0% at its June meeting. The Fed committee also said it would propose unlimited bond purchases to defend the implied 0.25% daily cap and repeat market-operating guidelines it set in April. In addition, Japanese Prime Minister Haruhiko Kuroda stressed the need to maintain the ultra-easy monetary policy as the country's economy is not much affected by global inflation trends as the country's 15-year deflationary experience slows wage growth.

- NZD: The New Zealand dollar held below $0.625, hitting a two-year low, as weak business survey results highlighted the risk that rising interest rates will lead to a recession. According to the latest ANZ Business Confidence Survey, nearly 63 percent of companies expect economic conditions to worsen in the coming year, mainly due to supply disruptions and surging cost pressures. This presents a challenge for the Reserve Bank of New Zealand, which is expected to stick to its aggressive tightening policy to reduce inflation, even if facing the risk of a recession. Markets are pricing in another 50-basis point rate hike in July, taking rates to 2.50% and nearly 4% by the end of the year. Royal Bank of New Zealand (RBNZ) has raised the official cash rate by 50 basis points twice this year, raising it by 25 basis points three times as the central bank acted in the face of decades of high inflation.

CHART OF THE DAY:

Sterling will fall below $1.22 in the second quarter of 2022, losing more than 10% in the year's first half, its worst six-month performance since the 2016 Brexit referendum. A broadly stronger dollar, rising recession fears, soaring inflation, and falling living standards in the UK have pushed the pound lower. At the same time, investors remain concerned about the central bank's ability to control inflation without seriously damaging the economy. The Bank of England has raised interest rates five times since it became the first major central bank to raise rates in the wake of the COVID-19 pandemic in December and is now at 1.25%, its highest level in 11 years. Still, inflation has continued to rise, reaching its highest level in 1982, and the economy has contracted by 0.3% in April and 0.1% in March.

- GBPUSD - D1, Resistance around ~ 1.23004, Support around  ~ 1.20632

The decline in real PCE fueling concerns about the Fed continuing to raise rates in a slowing economic environment

GLOBAL CAPITAL MARKETS OVERVIEW:  

On Thursday, Wall Street closed in negative territory, with the Dow down 253 points, the S&P down 0.9%, and the Nasdaq underperforming with a 1.1% loss due to persistently high inflation and a longer-than-expected tightening cycle. The threat of looming and lingering concerns about a worsening growth outlook. On the data front, core PCE price index inflation, the Fed's preferred measure of inflation, eased after falling to a six-month low of 4.7% in May 2022. All three major indexes posted sharp monthly and quarterly losses, with tech stocks being hit especially hard. In the first half of the year, the Dow and S&P 500 had their worst performances since 1962 and 1970, respectively, while the Nasdaq was on track for its worst half-year performance. Stagflation and the risk of aggressive rate hikes drove much of the stock market sell-off in the first half, with the coronavirus outbreak in China and Russia's invasion of Ukraine adding to volatility. Canada's main stock index, the S&P/TSX, closed down 1.1%, or 217 points, at 18,861 on Thursday, with all sectors in the red, led by healthcare (-4.1%), followed by materials (-3.6%), technology sectors (down 1.7%) and oil and gas (down 1.1%). At the bottom of the index, pot company Canopy grew 18.5% lower after the company reached an agreement with Constellation Brands Inc to convert about $198 million of convertible debt into stock. Also, commodity-linked stocks have come under pressure from the recession as crude oil futures, and metals prices fell. Meanwhile, investors digested weak preliminary data that output contracted 0.2% in May, adding to growth concerns. In the first half of 2022, the TSX was down about 11.1%, largely due to an 11.8% plunge in the second quarter.On Thursday, the MOEX index tumbled 7.3% to close at 2,205, its lowest level in more than two months, as Gazprom's dividend withdrawal sparked a sharp sell-off in Russian stocks. It was the most high-profile cancellation of dividend payments since sweeping Western sanctions made the phenomenon common, sparking contagion across all sectors of the session. Shares in the state-owned giant plunged 30 percent after withdrawing a previously announced record dividend of 52.53 rubles a share, sparking a rally that has significantly outperformed broader indexes and is close to pre-invasion levels. The board said the current situation was unsuitable for for-profit distribution as the company had to reinvest its resources for the winter. Gazprom's earnings are expected to remain strong as soaring gas prices generate record revenue in 2021, even as Gazprom slashed exports to Europe. European stocks fell sharply on the last trading day of June, with Frankfurt's DAX down 1.7% to close at its lowest level since November 2020 and the Stoxx 600 down 1.6%, with all sectors in negative territory. Stocks continued to fall as central banks tasked with reducing inflation from historically high levels have raised concerns that central banks will push their economies into recession. In contrast, the ongoing war in Ukraine continues to pose problems for commodity supplies. Meanwhile, shares in German energy company Uniper fell 14.4% after it withdrew its 2022 financial outlook due to gas supply constraints from Gazprom. Year-to-date, in its worst first semester since the Great Recession in 2008, the DAX fell 19.5%, and the Stoxx 600 fell 16.6%, its worst quarterly performance since the onset of the pandemic in early 2020, with both Both indexes falling about 9%. The CAC 40 index fell 1.8 percent to end at 5,922.86, extending losses for a third session, as new high domestic inflation data fueled fears of tighter monetary policy and a possible recession. Banks and cyclical stocks were the most affected. The president of the European Central Bank announced today that commercial banks would factor in rising interest rates when calculating their robustness, as the ECB raises interest rates for the first time in 11 years in July. Societe Generale, the most vulnerable of all banks, fell 6.28%. Elsewhere, shares in Renault fell 2.6%, and debt-ridden Alstom fell 8.11% on credit risk concerns. For the month, the CAC 40 fell 8.44%, its biggest drop since March 2020, and plunged 11% in June's quarter. FTSE MIB index fell 2.5% to close at 21,295 after falling 16.2% in the second quarter to a 17-month low as investors grew increasingly concerned about the possibility of a recession. Confidence in Italy's political stability has also been dented by Prime Minister Mario Draghi's departure from a NATO summit to resolve political issues in Rome after Foreign Minister Di Maio left and split the 5 Star Movement. Milan's heavyweight banking sector fell 3.7% on average, with Italy's two largest lenders, Intesa Sanpaolo and UniCredit, falling more than 5%. Meanwhile, reports have suggested that the Italian government will pass a new energy aid package worth 8 billion euros in response to a surge in utility prices caused by cuts in Russian gas supplies. On the data front, Italy's unemployment rate fell below expectations at 8.1% in May, the lowest since the pandemic's start, while producer prices continued to fall. The Hang Seng index fell 0.6% on Thursday to close at 21,860, the technology index fell 1.4%, and the China Enterprises index fell 0.4%. Tencent Holdings was among the worst performers (-2.9%) after major Dutch shareholder Prosus announced plans to cut its stake in WeChat operator Tencent. Considering June, the Hang Seng Index rose 2%, its best monthly performance since October. In the second quarter, however, Hong Kong stocks fell 0.6%. New Zealand NZX 50 fell 90.11 points, or 0.82%, to settle at 10,868.70, its lowest close in a week, extending losses from the previous session and plunging 4.7% this month amid growing concerns about rising interest rates and inflation. An intensification could weaken economic momentum. The U.S. economy contracted more than expected in the first quarter as consumer spending was revised sharply. Traders continued to avoid riskier assets as New Zealand business sentiment fell to a 26-month low in June. In China, factory activity and the services sector rose for the first time in four months in June. However, headwinds remained, including a still-sluggish housing market, weak consumer spending, and concerns about a resurgence of virus infections. Shares in fleet management company Broad fell to a record low after its former chief executive abruptly quit the company in April. Other notable losers included Harmoney Corp (down 8.9%), ArborGen Holdings (down 6.7%), and Hamburg Fuel Group (down 4.8%). On Thursday, the Shanghai Composite rose 1.1% to close at 3,399. The Shenzhen Composite rose 1.6% to 12,896, near its highest level in nearly four months, as China's economy showed signs of improvement amid the easing of the coronavirus outbreak. . In June, China's manufacturing and services sectors expanded for the first time in four months as authorities gradually lifted virus restrictions and resumed production and consumption. The benchmark index also posted its biggest monthly gain in nearly two years, buoyed by expectations that Chinese policy will become more accommodative to support the economic recovery. Growth-oriented tech and new energy stocks led gains, with strong gains from TCL Central (10%), Orient Currency (2.2%), Wingtech Technology (8.2%), Tianqi Lithium (1.6%), and Longi Green Energy (3.9%). Consumer, tourism, and manufacturing stocks also rose in hopes that the economy would continue to reopen. The Nikkei 225 fell 1.54% to close at 26,393. The broader Topix index fell 1.2% to close at 1,871 on Thursday, extending losses from the previous session as investors factored in the rising risk of a global recession Inside as major central banks aggressively hike interest rates to combat soaring inflation. The data also showed that Japan's industrial production fell 7.2% in May, well below the consensus forecast of 0.3%, which analysts said could be affected by China's lockdown. Technology stocks led losses, with SoftBank Group (-1.7%), Tokyo Electron (-4.1%), and Renesas Electronics (-3.9%) falling sharply. Other index heavyweights also fell, including Sony Group (down 3.4%), Mitsubishi UFJ (down 1.6%), and Tokyo Electric Power (down 2.1%). Elsewhere, shares in Toyota fell 1.1% after the company missed its monthly production target for the third straight month in May. The benchmark index fell this month. Australia S&P/ASX 200 index fell 1.97% on Thursday to close at 6568, marking its worst month since March 2020, after falling 8.92% in June on concerns that aggressive monetary tightening by major central banks could lead to the global economy has plunged into recession, with technology- and commodity-intensive exchanges being particularly hard hit. Federal Reserve Chairman Jerome Powell underscored that concern, saying the U.S. central bank's rate hikes slowed the economy too much, but the bigger risk was persistent inflation. Mining and gold stocks led losses on Thursday, led by weaker metals prices, with BHP Group (down 3.5%), Fortescue Metals (down 4.7%), Rio Tinto (down 3.3%) %), Newcrest Mining (down 2.8%), and Northern Star Resources (down 2.7%). Energy companies also fell on weaker oil prices, including Woodside Energy (down 3%), Santos Ltd (down 1.6%), and Beach Energy (down 3.6%). Elsewhere, tech, financials, and consumer stocks mostly fell, while healthcare companies outperformed the market.

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- US: The rout in U.S. stocks subsided in Thursday afternoon trade but remained down 1% as concerns over deteriorating growth prospects under the threat of persistently high inflation and a longer-than-expected tightening cycle played a role. Otherwise, it could tip the economy into recession. On the data front, core PCE price index inflation, the Fed's preferred measure of inflation, eased after falling to a six-month low of 4.7% in May 2022. All three major moving averages are also set for sharp monthly and quarterly declines, with tech stocks being hit especially hard. In the first half of the year, the Dow and S&P 500 had their worst performances since 1962 and 1970, respectively, while the Nasdaq was on track for its worst half-year performance. Runaway inflation, aggressive interest rate hikes, and recession risks drove much of the stock market sell-off in the first half, with volatility caused by China's Covid-19 lockdown and Russia's invasion of Ukraine.

- US: In May 2022, the U.S. personal consumption expenditures price index rose 0.6% month-on-month, up from 0.2% in April. However, the annual rate remained unchanged at 6.3% after hitting a record 6.6% in March. Energy prices rose 35.8% (30.4% in April), while food inflation accelerated to 11% from 10%. Excluding food and energy, personal consumption expenditures inflation fell to 4.7% from 4.9%, below expectations for 4.8%.

- US: In a sign of tight labor conditions, new U.S. jobless claims fell by 2,000 to 231,000 in the week ended June 25, compared with a market forecast of 228,000. On a non-seasonally adjusted basis, initial jobless claims increased by 1,060 from the previous week to 207,421, with New Jersey (up 5,471), Massachusetts (up 3,152), and Ohio (up 2,472) ) and Kentucky (+1.501) seeing notable increases. The 4-week moving average is 231,750, an increase of 7,250 from last week's upwardly revised average.

- US: U.S. personal spending edged up 0.2% month-on-month in May 2022, the slowest gain this year, after a downwardly revised 0.6% gain in April. The data was below market forecasts of 0.4%. Spending on services increased, i.e., housing, international travel, hospital services, and gasoline, while spending on cars and parts decreased, i.e., new vehicles. Real or inflation-adjusted personal spending fell 0.4%, the first decline this year, a sign that persistently high consumer prices are starting to weigh on households' affordability.

- US: In May 2022, U.S. personal income rose 0.5% from the previous month, unchanged from the last month, in line with market expectations, as increases in wages and homeowners offset declines in government social benefits. In terms of compensation, the increase reflects increases in private and government wages and salaries. The rise in owner income was mainly non-farm income. The decline in government social benefits primarily reflects a decrease in transfers to nonprofit health care providers through the Provider Relief Fund, partially offset by increases in Medicaid and Medicare.

- CA: The Canadian Financial Investment Council's (CFIB) Business Barometer's Long-Term Optimism Index, based on a 12-month outlook, fell nearly three points to 59.4 in June 2022, the lowest level since January and the third straight monthly decline. Optimism has deteriorated across all sectors, except natural resources, financials, and real estate, which have seen little change.

- HK: Retail sales in Hong Kong fell 4.9% year-on-year in May 2022, compared with an 8% drop in April. Sales in supermarkets and department stores fell sharply (8.4% and 2.3%, respectively), while department stores recorded sales of 6.4% and 8.4%, respectively. The hardest-hit stores were consumer durables (down 11.4% and 28.3%, respectively); and apparel, footwear, and related products (down 7.6% and 1.9%, respectively). In addition, sales of food, alcoholic beverages and tobacco continued to decline (-2.9% and -1.5%, respectively); fuel (-12.1% and -11.5%, respectively), while jewelry, watches, and valuables (3.1%, respectively) and 6.5%). Looking ahead, however, the government confirmed that the retail sector should continue to recover as long as the local outbreak is contained.

- EU: The eurozone unemployment rate edged from 6.7% in April to a new record low of 6.6% in May 2022, compared with market forecasts of 6.8%. 11.04 million were unemployed, of which 1.988 million were young people under 25. The unemployment rate for women fell from 7.2% to 7.1%, and the unemployment rate for men fell from 6.3% to 6.2%. Unemployment has been falling since early 2021 as economies rebound from the hit of the pandemic, but rising inflation and interest rates are expected to slow the recovery.

- GE: Germany's seasonally adjusted unemployment rate rose to a seven-month high of 5.3% in June 2022 after remaining at the pre-pandemic level of 5% for the third straight month in May. This increase is due to Ukrainian refugees registering with the Labour Office in search of work. However, the head of the Federal Labour Office, Detlef Scheele, said that "the overall labor market remains stable."

- GE: Germany's seasonally adjusted number of unemployed roses by 133,000 to 2.417 million in June 2022, compared with market forecasts for a drop of 6,000. It was the first rise in unemployment since February last year and the most significant increase since May 2020 as Ukrainian refugees registered at employment centers. Adjusted for these effects, however, the unemployment rate held steady, even as demand for new workers softened. Meanwhile, the unemployment rate rose to 5.3% from 5%, the lowest level since March 2020.

- SK: In May 2022, South Korean industrial production rose 7.3% year-on-year, up from 3.5% in April and beating expectations for a 3.1% increase. The seasonally adjusted monthly data showed that industrial output rose 0.1% in May, rebounding from a 3.3% slump in April. Asia's fourth-largest economy maintained its modest recovery amid heightened external uncertainty. Latest signs. The statistics agency said the rebound in industrial output in May was led by robust service sector production and increased investment in facilities and construction. "Production of semiconductor-related equipment has suffered setbacks due to disruptions in the supply of components. Investment rebounded last month as these issues were resolved," Eo Woon sun, a senior official at Statistics Korea, told reporters.

- SW: Sweden's central bank (Sveriges Riksbank) raised its benchmark interest rate by 50 basis points to 0.75% in June 2022, in line with market expectations, and said it would raise rates further this year. The executive committee also decided to reduce asset holdings faster in April. The decision came by a surprise 25 basis points at the central bank's last meeting, as policymakers sought to offset price spikes and prevent higher inflation from becoming entrenched in price and wage settings. The year-end benchmark interest rate forecast was raised and is expected to be close to 2%. Meanwhile, inflation is forecast to average 7.6% in 2022 and 7.1% in 2023, compared with previous forecasts of 6% and 5%. Under current projections, inflation is expected to normalize to 2% by the second quarter of 2025.

LOOKING AHEAD:   

Today, investors will receive:

- USD: Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending m/m, ISM Manufacturing Prices, and Wards Total Vehicle Sales.

- EUR: French Gov Budget Balance, Spanish Manufacturing PMI, Italian Manufacturing PMI, French Final Manufacturing PMI, German Final Manufacturing PMI, Final Manufacturing PMI, CPI Flash Estimate y/y, Core CPI Flash Estimate y/y, and Italian Prelim CPI m/m.

- GBP: Final Manufacturing PMI, M4 Money Supply m/m, Mortgage Approvals, and Net Lending to Individuals m/m.

- JPY: Tokyo Core CPI y/y, Unemployment Rate, Tankan Manufacturing Index, Tankan Non-Manufacturing Index, and Final Manufacturing PMI.

- NZD: Building Consents m/m.

- AUD: AIG Manufacturing Index, and Commodity Prices y/y.

- CNY: Caixin Manufacturing PMI.

- CHF: Manufacturing PMI

KEY EQUITY & BOND MARKET DRIVERS:

- US: U.S. 10-year Treasury yields fell below the 3% mark, retreating to levels not seen in three weeks, as investors scrambled for safe-haven assets amid persistent concerns that the Federal Reserve will hurt the U.S. economy as it tries to rein in inflation into recession. Those concerns were further exacerbated by weak economic data this week, namely signs of slowing consumer spending, with consumer morale at a 16-month low and GDP data below expectations. On the other hand, core PCE price index inflation, the Fed's preferred measure of inflation, fell to a six-month low of 4.7% in May 2022, suggesting price gains may be slowing. Still, borrowing costs are expected to increase by 11 basis points this month as Fed officials reiterated their determination to rein in inflation, with a 75-basis-point rate hike scheduled in July.

- US: U.S. stock futures pared some of their early losses as investors reacted positively to an inflation report that showed annual core PCE inflation rose less than expected. The Fed's preferred measure of inflation fell to a six-month low of 4.7%, signaling a possible slowdown in price gains and sparking speculation the central bank may be letting go. Still, the S&P 500 is set for its worst first half since 1970, amid persistent concerns about the impact of soaring inflation and tighter monetary policy on the growth momentum. All three major moving averages are also set for sharp monthly and quarterly declines, with tech stocks being hit especially hard. Runaway price growth, aggressive rate hikes, and recession risks drove much of the stock market sell-off in the first half, with volatility further exacerbated by the coronavirus outbreak in China and Russia’s invasion of Ukraine.

- FR: French 10-year oat futures yielded below 2 percent, near a three-week low of 1.9 percent hit on June 24, as investors turned to safer securities amid fresh fears of an economic contraction. Domestic inflation figures for June came in slightly above market expectations. They would hit a 37-year high, adding pressure on risky assets as the European Central Bank tightens policy in July. At the Bank of Portugal's annual forum, President Lagarde said that the pace of policy drawing for the rest of the third quarter largely depends on how inflation expectations develop. In addition, traders continued to await details on the ECB's new tool and how it will affect bond yield spreads between member states of the eurozone. According to the latest estimates, INSEE expects the French economy to expand by 0.2% in the second quarter and by 0.3% in the third and fourth quarters after contracting by 0.2% in the first quarter.

STOCK MARKET SECTORS:

- High: Utilities, Industrials, Real Estate.

- Low: Consumer Discretionary, Financials, Communication Services, Information Technology, Materials.

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- RUB: The Russian ruble fell to 54 rubles per dollar from a seven-year high of 47.75 hit on June 29, as capital controls eased and government efforts to devalue the ruble. The CBR raised the limit for cross-border money transfers from $150,000 to $1 million. Meanwhile, Russia's finance minister said Russia might start buying foreign currency from "friendly countries" to offset a sharp rise in the ruble. Still, this year, the ruble is the world's best-performing currency so far, helped by large trade imbalances and persistent capital controls. Commodities exports to Asia at soaring prices have kept demand for the ruble strong despite European efforts to limit purchases of Russian energy and commodities. In addition, the collapse in import activity due to sanctions halted domestic demand for dollars, exacerbating high fees and negative interest rates on deposits by banks in currencies of “unfriendly” countries.

- EUR: The euro fell to the $1.04 mark, near a five-year low of $1.035 hit in May, on heightened demand for the safety of the dollar and monetary policy differences between the European Central Bank and the Federal Reserve. Investors' appetite for a safer U.S. dollar has grown as fears of an energy crisis in Europe threaten the eurozone economy ahead of winter. European Central Bank President Christine Lagarde said she thought the eurozone would unlikely return to a low-inflation environment, denting confidence in the euro. Earlier, the ECB president had confirmed a 25-basis point rate hike in July after several ECB policymakers called for a short walk. Conversely, Cleveland Fed President Mester supports a 75-basis point rate hike at the Fed's next meeting if economic conditions remain unchanged.

- USD: The U.S. dollar index remained above 105 on Thursday, hovering near a 20-year high of 105.79 hits in mid-June, as global recession fears bolstered demand for the greenback’s safety, while a hawkish Federal Reserve also supported the greenback. Data in May showed the core PCE price index, the Fed's preferred measure of inflation, rose at an annual rate of 4.7%, reflecting further deceleration but remained stubbornly high. At the European Central Bank's annual forum, Chairman Jerome Powell said that while demand destruction could lead to an economic slowdown, bringing inflation back to healthy levels was essential. Meanwhile, Cleveland Fed President Mester said she would advocate for another 75-basis point rate hike in July if economic conditions remain intact. The DXY is set to appreciate 7.2% in the second quarter of this year as the Fed hiked rates by 150 basis points since its March meeting.

- CNY: The offshore yuan held steady at around 6.70 per dollar and was almost flat at the end of the month, as China's economy showed signs of improvement as the coronavirus outbreak eased. In June, China's manufacturing and services sectors expanded for the first time in four months as authorities gradually lifted virus restrictions and resumed production and consumption. Meanwhile, investors are wary of China sticking to a strict zero-coronavirus policy amid concerns that the country remains vulnerable to a lockdown. In addition, Yi Gang, governor of the People's Bank of China, said China's policy stance would remain accommodative to support economic recovery. Those contrasts sharply with the hawkish tendencies of other major central banks, raising concerns about capital outflows and currency weakness.

- JPY: The yen hit 137 yen against the dollar for the first time since September 1998 before recouping some losses as Japan's monetary policy diverged sharply from other major economies. The Bank of Japan remains the only major central bank to maintain an ultra-easy policy as other significant economies race to raise interest rates to curb soaring inflation. As widely expected, the Bank of Japan kept its key short-term interest rate unchanged at -0.1% and the 10-year bond yield around 0% at its June meeting. The Fed committee also said it would propose unlimited bond purchases to defend the implied 0.25% daily cap and repeat market-operating guidelines it set in April. In addition, Japanese Prime Minister Haruhiko Kuroda stressed the need to maintain the ultra-easy monetary policy as the country's economy is not much affected by global inflation trends as the country's 15-year deflationary experience slows wage growth.

- NZD: The New Zealand dollar held below $0.625, hitting a two-year low, as weak business survey results highlighted the risk that rising interest rates will lead to a recession. According to the latest ANZ Business Confidence Survey, nearly 63 percent of companies expect economic conditions to worsen in the coming year, mainly due to supply disruptions and surging cost pressures. This presents a challenge for the Reserve Bank of New Zealand, which is expected to stick to its aggressive tightening policy to reduce inflation, even if facing the risk of a recession. Markets are pricing in another 50-basis point rate hike in July, taking rates to 2.50% and nearly 4% by the end of the year. Royal Bank of New Zealand (RBNZ) has raised the official cash rate by 50 basis points twice this year, raising it by 25 basis points three times as the central bank acted in the face of decades of high inflation.

CHART OF THE DAY:

Sterling will fall below $1.22 in the second quarter of 2022, losing more than 10% in the year's first half, its worst six-month performance since the 2016 Brexit referendum. A broadly stronger dollar, rising recession fears, soaring inflation, and falling living standards in the UK have pushed the pound lower. At the same time, investors remain concerned about the central bank's ability to control inflation without seriously damaging the economy. The Bank of England has raised interest rates five times since it became the first major central bank to raise rates in the wake of the COVID-19 pandemic in December and is now at 1.25%, its highest level in 11 years. Still, inflation has continued to rise, reaching its highest level in 1982, and the economy has contracted by 0.3% in April and 0.1% in March.

- GBPUSD - D1, Resistance around ~ 1.23004, Support around  ~ 1.20632

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