Weekly recap 30-3 May/June 2022

USA

The stock market suffered a minor setback from the previous week, losing some of the gains made earlier. With continued volatility and economic uncertainty, many investors are in doubt whether the Federal Reserve will be able to control inflation.

Recently uncertainty has grown about the Fed’s future decisions. Despite expected hikes of 0.5% at upcoming meetings, investors are beginning to believe that there will be a pause in the hikes of their key interest rate in September. Some members believe that economic conditions have been constrained enough to reduce inflation.

Europe

As expected, the big European problem remains the strong inflation present, the invasion of Ukraine, and weak economic growth.

The big news from Europe was the European Union’s decision to cut off Russian oil deliveries. Only 4 European countries were excluded from this embargo, due to their strong energy dependence on Russia. In retaliation, Russia cut off natural gas supplies to the Netherlands, for refusing to pay in Russian rubles.

With rising inflation, some members of the ECB have come to emphasize that the right course will undoubtedly be to raise their key interest rate. They plan to do this when they finish their asset purchase program, scheduled to end in September. They will then raise the key interest rate by 0.25% and make changes as necessary.

Asia

The Japanese market reacted well to the gradual reopening of its borders, with activity in some sectors increasing, particularly services. The Governor of the Bank of Japan also calmed investors when he stated that he believes Japan’s inflation expectation remains low and will remain so for the foreseeable future.

China also saw some gains in its stock market. Largely thanks to the good news coming from the Chinese government. They have unveiled a large support package, something particularly welcome after the economic slowdown caused by the strong confinement measures.

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