European Shares Dull Start Before the US Inflation Data
European shares may open slightly lower on Wednesday. Concerns about COVID-19 will return to the forefront. The number of new cases globally has increased by 30 percent in the past two weeks. The head of the World Health Organization said on Tuesday that the pandemic is nowhere near over. Many Chinese cities have adopted new restrictions. This makes the recovery of the economy in the third quarter uncertain. Markets are also wary of inflation risks for June ahead of US inflation figures to be released later.
Economists expect the annual rate of consumer price growth to accelerate to 8.8 percent in June. A higher rate would put even more pressure on the Fed to raise rates by another 75 basis points together with June’s three-quarter point increase at the end of this month. Closer in, GDP estimates and foreign trade data from the UK, and final inflation figures from Germany and France will be released later in the session. It’s a busy day for European economic news.
Asian markets saw slower gains in cautious trade. The International Monetary Fund has cut its growth forecasts for the US economy this year and next year. Crude oil extended losses overnight to reach $95 a barrel after US inventory data showed a build-up in crude and refined products. US stocks ended the night lower. Investors are gearing up for a big week of economic data and company earnings reports.
Shares and Inflation
The S&P 500 gave up 0.9 percent to extend losses for the third day. The inversion of Treasury yields has sparked fears of a recession. The Dow fell 0.6 percent. The Nasdaq Composite lost 1 percent. European stocks erased early losses and closed higher on Tuesday. The euro has bounced back, after nearly reaching parity with the US dollar. The Stoxx 600 gained half a percent on weak regional data, and a worsening energy crisis in Europe despite concerns and the emergence of a new, more infectious strain of COVID-19 in several parts of the world. The DAX rose 0.6 percent. CAC 40 index by 0.8 percent. The FTSE 100 rose 0.2 percent.
Japan’s Nikkei stock average rebounded on Wednesday. Chip-related stocks and airlines rose. Losses in energy stocks and worries about a global economic slowdown limited gains. The Nikkei stock average closed at 26,478.77. It was down 1.77% in the previous session, marking its worst day in a month. Concerns persisted about the outlook for global growth amid Europe’s energy crisis amid heightened uncertainty and China’s renewed struggle to control the spread of COVID-19 with a draconian zero-COVID policy.
The market’s immediate focus is on US consumer price data due on Wednesday. It shows how effective the Federal Reserve’s tightening has been so far, and potentially how much more may be needed. There is a feeling that the Nikkei has become cheaper. However, with so much uncertainty about the global economic outlook, it is very difficult to buy stocks aggressively.
Concerns over demand weighed on crude oil on Tuesday. That made energy the Nikkei’s worst-performing sector, down 0.71%. SoftBank jumped 2.4%, adding to the index. Fast Retailing added 24 points with its advance of 1.01%. It was followed by chipmaker Tokyo Electron, which added 20 points.
Shares of Chinese gaming companies rose on Wednesday. After the regulator approved the series of new games. This is a sign that some of the sector’s resistance may be easing. The list released by China’s National Press and Publication Administration on Tuesday did not include the approval of gaming giants NetEase and Tencent. Tencent shares were flat in Hong Kong trading. However, the continued approval of the game, which was renewed in April after being frozen for months, has turned other companies off.
Hong Kong-listed shares of NetEase were up nearly 3% in afternoon trade. Bilibili increased by more than 4%. Shares of Kingsoft were also higher in Hong Kong trading. Last year, China introduced rules limiting children under 18 to a maximum of three hours a week playing online games. Regulators chill the acceptance of new games for months. This had a vast influence on firms that bet heavily on gaming. Tencent released its low revenue rise on record in the 1/4 of this year.
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