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More and more economic experts believe that the Federal Reserve's plan to curb inflation may lead to a recession in the economy. To fight inflation, the Fed has launched its most aggressive monetary tightening campaign in decades, planning multiple rate hikes of half a percent in a row and $9 trillion in cuts to its balance sheet. But this tightening campaign is causing cracks in financial markets and steep increases in mortgage rates and other forms of borrowing. This could lead to an economic crisis in the coming months and put pressure on the Fed, both because of inflation and the negative side effects of higher rates. The Economic data is also not encouraging. The US producer price index, also called "factory" inflation or wholesale inflation, increased to 11% in annual terms. Last month's growth was 0.5%. According to many analysts, the producer price index is a more accurate indicator of the inflation faced by businesses and retailers that suffers the most from supply chain disruptions. The initial jobless claims increased to 203,000 (+1,000 for the last week). A strong labor market amid rising inflation is the first sign of an impending recession. Such signals scare investors enough to sell off their portfolios, which leads to a decrease in stock indices. At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.33%, the S&P 500 (US500) lost 0.13%, and the Nasdaq Technology Index (US100) fell by 0.06%.

Federal Reserve Chairman Jerome Powell was re-elected for a second term yesterday. Powell made an interesting point yesterday: "I have said, and I will say again, that, you know, if you had perfect hindsight, you’d go back, and it probably would have been better for us to have raised rates a little sooner," Powell said, in an interview with Marketplace that will air this evening.

Major European indices closed in the red zone yesterday. The German DAX (DE30) decreased by 0.64%, the French CAC 40 (FR40) fell by 1.01%, the Spanish IBEX 35 (ES35) lost 1.35%, and the British FTSE 100 (UK100) fell by 1.56%. Gabriel Makhlouf, head of the Central Bank of Ireland, has joined many European Central Bank policymakers in urging the ECB to be more decisive and take action on inflation.

According to analysts, the UK is already showing signs of stagflation (slowing economic growth while consumer prices are rising). It is likely that the Bank of England will have to raise interest rates even more to curb inflation, warns Bloomberg manager Dave Ramsden.

Sanctions imposed on "EuRoPol" GAZ by Moscow prohibit gas deliveries through the Polish section of the Yamal-Europe pipeline.

The International Energy Agency (IEA) said yesterday that it does not expect acute shortages amid the worsening disruption of oil supplies from Russia. According to the IEA, a new embargo against Russia may accelerate the reorientation of trade flows of Russian oil toward Asia. This is the reason why oil continues to rise despite lower demand. On the other hand, more and more European countries want to eliminate oil and gas dependence on Russia following its invasion of Ukraine. Sooner or later, this will cause serious economic damage to Russia as most of Russia's profits to come from the sale of oil and gas.

Asian markets closed yesterday with a decline. Japan's Nikkei 225 (JP225) fell by 1.77%, Hong Kong's Hang Seng (HK50) lost 2.24%, and Australia's S&P/ASX 200 (AU200) was down by 1.75%. On Thursday, Japanese Foreign Minister Yoshimasa Hayashi agreed with his counterparts in Britain, Canada, and France on the importance of G7 unity in countering Russia's invasion of Ukraine.

Chinese developer Zhongliang Holdings struggles to extend a $729 million bond maturity before next week's deadline to avoid defaulting on offshore debt. Zhongliang's bond default could heighten investor fears about China's real estate sector.
 

Main market quotes:

S&P 500 (F) (US500) 3,930.08 -5.10 (-0.13%)

Dow Jones (US30) 31,730.30 -103.81 (-0.33%)

DAX (DE40) 13,739.64 -89.00 (-0.64%)

FTSE 100 (UK100) 7,233.34 -114.32 (-1.56%)

USD Index 104.77 +0.92 (+0.98%)

Important events for today:

• Eurozone French Consumer Price Index (m/m) at 09:45 (GMT+3);
• Eurozone Spanish Consumer Price Index (m/m) at 10:00 (GMT+3);
• Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
• US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3);
• US FOMC Member Mester Speaks at 19:00 (GMT+3).