On Monday, crude oil, the US dollar and stocks all firmed, as investors prepared to get a hint on the direction of the economy and interest rates from several meetings of the central bank that will continue till next week. A meeting of the European Central Bank (ECB) is scheduled for Thursday. However, it is not expected to hike up interest rates until the next month. As for the Bank of England and the US Federal Reserve, the two central banks are scheduled for a meeting next week. Market analysts said that there were still doubts about inflation peaking and there was uncertainty because of China’s reopening.
Furthermore, oil prices are still rising and this makes it even more difficult to determine anything. The week started with some improvement in investors’ risk appetite with a 0.3% gain in the MSCI index. It had rebounded recently from close to bear-market territory and managed to hold onto it. There was also a 0.8% gain recorded in the STOXX 600 index of European firms. There is to be a confidence vote of British Prime Minister Boris Johnson on Monday by lawmakers of his Conservative Party. But, London shares did not seem affected by the news, as the blue chips rose by 1.2%.
There was a sharp increase in the price of crude by Saudi Arabia for July sales, which pushed up oil prices even further. This gives insight into the supply issues, even though OPEC+ has agreed to increase their crude output over the next two months. There was a 0.6% increase in Brent, which brought it to $120.41 per barrel. A 0.55% increase in US crude brought it to $119.53 per barrel. Market analysts said that taking risks in this environment could turn out to be quite rewarding. There was also a 1% rise in S&P 500 futures and 1.4% in Nasdaq futures, which showed that Wall Street had had a strong opening.
There was also a 0.6% in shares in Asia-Pacific and a similar increase in Japan’s Nikkei as well. Even though May saw service activity shrink in China, the Caixin index rose from 36.2 to 41.4. This pushed up blue chips in the country by 1.9%. There was also a boost in sentiment when Gina Raimondo, the US Commerce Secretary, disclosed that President Biden was considering lifting some Chinese tariffs. Markets will be keeping an eye out on the US Consumer Price Index (CPI) report that is due on Friday.
There is a lot of focus on the report because last week showed a shockingly high increase in inflation numbers in the EU. According to forecasts, inflation in May would probably be up by 0.7%, but the annual pace is expected to be around 8.3%. As for core inflation, it is expected to show a slowdown to 5.9%. If the number turns out to be high, it will further confirm that the US Federal Reserve will continue its interest rates hike throughout the year to prevent the economy from going into recession.