Photo by Nicholas Cappello on Unsplash

The US Jobless claims showed a sharp jump yesterday and spurred expectations of a Federal Reserve pause next week. This led to a drop in the dollar index and Treasury yields. Consequently, stock indices, which have an inverse correlation to the dollar index, got a boost. At the close of the stock market yesterday, the Dow Jones index (US30) increased by 0.50%, and the S&P 500 Index (US500) was up by 0.62%. The NASDAQ Technology Index (US100) closed positive by 1.02% on Thursday.

The International Monetary Fund (IMF) on Thursday urged the US Federal Reserve and other global central banks to continue tightening measures to reduce inflation. The report indicates that although inflation is slowing, it is still the most worrisome.

Goldman Sachs Group Inc. is planning a period of sluggish growth and higher inflation, calling it a "mini-stagflation scenario." Although the US economy is showing resilience, concerns remain among investors that a recession could occur amid stubborn inflation and high borrowing costs. There is uncertainty about the extent of the economic downturn, as many fear that the impact of higher interest rates is not yet fully felt in areas such as private lending and real estate.

Equity markets in Europe traded flat yesterday. Germany's DAX (DE30) gained 0.50%, France's CAC 40 (FR40) added 0.27% on Thursday, Spain's IBEX 35 (ES35) decreased by 0.17%, Britain's FTSE 100 (UK100) closed down by 0.32%.

According to a clear majority of economists, the European Central Bank will raise its key interest rates by 25 basis points on June 15 and again in July before pausing for the rest of the year. In contrast, the US Federal Reserve is projected to remain paused at its June meeting and for the rest of the year.

Inflation in Switzerland remains high, and interest rates must be raised to keep it under control, Swiss National Bank President Thomas Jordan said yesterday. This is Jordan's last public speech before the SNB's upcoming interest rate decision on June 22. Economists expect the Swiss central bank to continue raising another 25 basis points, even though the country's inflation remains among the lowest in the world.

The US and Great Britain signed a new "Atlantic Declaration" on economic cooperation. The countries have agreed to create a new civilian nuclear energy partnership as part of a clean energy cooperation that will include building new infrastructure over the long term and reducing dependence on Russian fuel. The two countries will also begin talks on a critical minerals agreement that will allow some British companies access to tax breaks. These minerals, such as lithium, nickel, cobalt, graphite and manganese, are crucial for the production of batteries for electric cars, smartphones and solar panels.

Asian markets traded flat yesterday. Japan's Nikkei 225 (JP225) decreased by 0.85% for the day, China's FTSE China A50 (CHA50) was up by 1.11%, Hong Kong's Hang Seng (HK50) ended the day up by 0.25%, India's NIFTY 50 (IND50) lost 0.49%, and Australia's S&P/ASX 200 (AU200) ended Thursday negative by 0.26%.

India's Central Bank kept its key interest rate unchanged for a second straight meeting Thursday. India raised rates by 250 basis points from May 2022.

Fitch Ratings changed its outlook on Australia and New Zealand's banking sector from "Neutral" to "Worsening", reflecting stronger constraints on bank earnings and asset quality.

China's consumer price inflation continued to decline in May, with the producer price index reaching a 7-year low. On an annualized basis, consumer prices rose from 0.1% to 0.2%, but factory inflation (PPI) fell from minus 3.6% to minus 4.6%. The sharp drop in PPI points to a steady decline in manufacturing, indicating that the economic recovery is slowing.

S&P 500 (F) (US500) 4,293.93 +26.41 (+0.62%)

Dow Jones (US30)33,833.61 +168.59 (+0.50%)

DAX (DE40) 15,989.96 +29.40 (+0.18%)

FTSE 100 (UK100) 7,599.74 −24.60 (−0.32%)

USD Index 103.33 −0.77 (−0.74%)

Important events for today:

• – China Consumer Price Index (m/m) at 04:30 (GMT+3);
• – China Producer Price Index (m/m) at 04:30 (GMT+3);
• – Canada Unemployment Rate (m/m) at 15:30 (GMT+3).

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