Investments, households, businesses: the squeeze on ECB rates will bring more expensive installments and loans
by Vittoria Puledda
MILAN – The day is still weak for the world stock exchanges, after the decision of the ECB to start the rate hike and close net purchases of government bonds. A decision expected by the markets, even if there are elements that have led to a “hawkish” reading of the Eurotower’s position: Lagarde announced a 25-point hike in July, but September’s will be heavier unless (unlikely) inflation improves. And it has not given clear signals on the moves to protect the weaker countries from the increase in spreads, which promptly occurred for Italy: it will resort to flexibility in the reinvestments of the securities bought with the anti-pandemic program and – assured the president – will be able to refine further tools, but there are no particular alert levels at which they will trigger. Furthermore, the growth scenario remains very fragile both due to the unknown factor of the war in Ukraine and the very effects of the monetary tightening. If you add all these things together, it explains the weakness of the euro that yesterday closed the day with the sharpest decline in the dollar in a month: a paradox, at a time when monetary tightening should usually strengthen the single currency. Investors begin to discount the growing risks to European growth, is the reasoning of Dominic Bunning of HSBC with Bloomberg“which could limit the ECB from realizing the monetary tightening that the market has begun to price” after yesterday’s announcements.
by Vittoria Puledda
Today the single currency opens trading at 1.0617. The spread rises again between Italian BTPs and German Bunds: the differential stands at 230.9 points with a yield of 3.758%. Stock exchanges start in red: Milan drops 0.6%, with Bper particularly penalized after the presentation of the business plan to 2025.
On the other hand, the futures of Wall Streetpending the important data onUS inflation in May and after closing the worst session of the last three weeks with the S & P500 down 2.4 percent. According to analysts, it should remain stationary at 8.3%, while the ‘core’ one, net of energy and food, should slow from 6.2% to 5.9%. The market takes it for granted that the Federal Reserve will raise interest rates next week, although it strengthens the argument that it will probably ease the squeeze later in the year so as not to threaten the economy too much. Futures on the Dow Jones are up by 0.14%, those on the S&P 500 are up by 0.25% while on the Nasdaq by 0.46%.
The difficult session in the USA last night reverberated on the Asian markets with the closing down sharply for the stock exchange. Tokyo: the Nikkei index closes the session down by 1.48% to 27,828.50 points. Among other Asian squares, on parity Hong Kong in closing, while the Chinese stock exchanges are positive (Shanghai + 1.1% e Shenzhen + 1.7%) on less heavy inflation data than expected which offset fears for the new Covid lockdowns. Indeed, Chinese producer prices are slowing down: in May, there was an increase of 6.4% on an annual basis, compared to + 8% in April.
Also from China comes the information that is driving oil prices down, even if they are close to three-month highs: they weigh fears about new lockdowns in Shanghai and despite solid demand for fuels in the United States, the world’s largest consumer. Brent futures fell 0.6%, to $ 122.34 a barrel while WTI was down 0.63% and fell 72 cents, or 0.6%, to $ 120.79 a barrel.
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