Weekly summary 18-22 July 2022

USA

Last week was filled with relatively bad economic data, however, this did not stop the major indices from having a fairly positive week.

Many investors seem to appreciate the slowdown in the economy, which could lead to a reduction in inflation. Consequently, it is perhaps possible that investors’ expectations of the Federal Reserve have changed. If indeed the next inflation data appear more moderate it is possible that the Fed will consider a smaller increase in its key interest rate, something beneficial for economic prosperity.

Europe

A similar move happened in Europe, particularly unusual given the proximity to the conflict between Russia and Ukraine and the fact that the European Central Bank raised its key interest rate by 0.50% for the first time in more than ten years.

They also announced a new instrument to prevent cost price hikes in countries that are in worse economic conditions such as Portugal, Italy, and Spain.

Italy faces another political crisis after Mario Draghi resigned. The next elections are scheduled to be held on September 25.

Asia

The Bank of Japan maintains its accommodative stance, keeps its benchmark interest rate extremely low, and its asset purchase program is aimed at reaching the 2% inflation rate steadily. They continue to struggle with the consequences of COVID-19, yet the government believes it is not necessary to re-impose movement restrictions between regions.

A boycott by many home buyers, who are refusing to make payments on their loans for unfinished projects, is worrying some investors. It is estimated that this boycott has affected projects totaling about 300 billion.

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