The Bank of Japan kept its monetary policy soft. The Swiss Central Bank surprised the market with a rate hike

The US initial jobless claims were 229,000, down 3,000 from the previous week. Thus, the US labor market remains strong. But as fears of recession intensified following central bank actions worldwide, the US stock indices closed on Thursday with a sharp decline. As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 2.41% and the S&P 500 index (US500) lost 3.24%. The Technology Index NASDAQ (US100) fell by 4.08%. At the end of the day, all three indices were down.

Hopes that the Fed can arrange a soft economic landing are fading, and Wells Fargo analysts now see a more than 50% chance of a recession. Other banks, Deutsche Bank and Morgan Stanley, are also warning of rising recession risks.

Stock markets in Europe also fell yesterday. German DAX (DE30) decreased by 3.31%, French CAC 40 (FR40) lost 2.39%, Spanish IBEX 35 (ES35) fell by 1.18%, British FTSE 100 (UK100) was down by 3.14%.

Yesterday, European Central Bank President Christine Lagarde told Eurozone finance ministers about the ECB's plans to limit bond spreads. Analysts believe this is the beginning of the preparation process to raise the interest rates. On the back of this news, the euro jumped sharply, while stock indices, on the contrary, declined.

The Bank of England on Thursday implemented its fifth consecutive interest rate hike to curb skyrocketing inflation. The Monetary Policy Committee voted 6-3 to raise the bank rate by 25 basis points to 1.25%, with three dissenting members voting for a 50 basis point increase to 1.5%. The committee also said that it would take the actions necessary to bring inflation back to the 2% target in the medium term in a sustainable manner.

Switzerland's Central Bank surprises markets with its first rate hike since 2007. The Swiss National Bank raised interest rates for the first time in 15 years, joining other central banks in tightening monetary policy to combat resurgent inflation and sharply raising the franc, a haven currency for many investors. The Central Bank raised the discount rate to 0.25% from 0.75%. "At this point, we see that inflation in Switzerland has increased - we have it close to 3% - and we have also noticed that we have some risk of secondary effects," said SNB Chairman Thomas Jordan. The franc's strength has cushioned the impact of inflation in Switzerland by reducing fuel prices and food imports increases. Nevertheless, the SNB raised its inflation forecast for 2022 to 2.8% from 2.1%.

Oil prices jumped yesterday after the United States announced new sanctions on Iranian oil, ahead of President Joe Biden's visit to the Middle East to meet with Persian Gulf leaders, including Saudi Crown Prince Mohammed. This year's record gasoline prices in the US due to a global decline in oil supplies and a drop in popularity among potential voters have Biden looking for ways to deal with high gasoline prices. Analysts say the goal of the visit is to increase oil production in order to lower oil prices.

Asian equity markets traded flat yesterday. Japan's Nikkei 225 (JP225) gained 0.40%, Hong Kong's Hang Seng (HK50) ended down by 2.17%, and Australia's S&P/ASX 200 (AU200) fell by 0.15%. On Friday, the Bank of Japan kept interest rates ultra-low and its guidance to keep borrowing costs at "current or lower" levels, signaling its determination to focus on supporting the recovery from the COVID-19 pandemic. In a sign that the recent sharp drop in the yen could impact the economy, the Central Bank said it would keep a close eye on how changes in the exchange rate could affect the economy.

Main market quotes:

S&P 500 (F) (US500) 3,667.24 −122.75 (−3.24%)

Dow Jones (US30) 29,929.31 −739.22 (−2.41%)

DAX (DE40) 13,038.49 −446.80 (−3.31%)

FTSE 100 (UK100) 7,044.98 −228.43 (−3.14%)

USD Index 103.76 -1.40 (-1.33%)

• – Japan BoJ Interest Rate Decision at 06:00 (GMT+3);
• – Japan BoJ Monetary Policy Statement at 06:00 (GMT+3);
• – Eurozone Consumer Price Index (m/m) at 10:30 (GMT+3);
• – US Fed Chair Powell Speaks at 15:45 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3).

by JustMarkets, 2022.06.17

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.