Weekly Market Update – 12 August, 2022
Recession fears in the US were tempered by a few data releases this week. Firstly, the July employment data showed a rate of growth double what was forecasted. CPI and PPI data also showed a rate of increase that slowed relative to prior months, leading to anticipation that peak inflation has passed and that the Fed may be able to dial back from another 75bp rate hike in September. Despite the disinflationary data, the implied Fed Funds rate still shows almost a 100bp increase between now and end of year (3.41% vs current 2.50%).
With growing fears of a recession in Europe, the euro remains just above parity with the dollar, although it did see a bit of a rally mid-week on the US inflation data. European power prices rose to fresh records on Thursday as Russia continues limiting supplies of natural gas which has caused German power plants to switch from natural gas to diesel. Wildfires and hotter temperatures across Europe are also contributing to price surges.
In Asia, Hong Kong reduced its GDP outlook from a range of 1%-2% to -0.5%-0.5% due to global economic conditions and continued COVID restrictions. Elsewhere in Asia, Malaysia’s GDP grew 8.9% in the second quarter after as much as 16% growth in the month of July. Tensions continue to be elevated between China and the US with several Chinese state-owned companies announcing they would de-list from US stock markets, including Sinopec.
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