Daily Wrap Up 01 June 2022

1 Jun 2022 04:31 PM

Stocks fall amid cost-of-living concerns

The mood in the markets is a little downbeat as worries about a cost-of-living crisis are still doing the rounds. German retail sales were very disappointing as they dropped by 5.4% in April, it was the weakest reading in four months. There is growing speculation that consumers around the world will feel the pinch. As we saw earlier this week, Germany CPI hit its highest mark in almost 50 years. Keep in mind that CPI in the US and the UK are at 40-year highs, so that spells tough times ahead for shoppers.

Yesterday it was confirmed that CPI in the eurozone increased to 8.1%, a new record high. The increased chatter the European Central Bank will have to act in terms of lifting interest rates, but today there was mixed messages from the policymakers. Robert Holzmann called for a 50-basis point hike to tackle inflation, while Edward Scicluna said there is little support for a 50-basis point lift. The single currency enjoyed a rally in the latter half of May, in part the rise was down to the possibility of a rate hike. Considering Scicluna’s, comments it appears the rise in the euro was over down as the central bank might choose an easy lift off to hiking rates. EUR/USD and EUR/CHF are in the red.

The Bank of Canada hiked interest rates by 50 basis points to 1.5%, the move was in line with expectations. In addition to hiking rates, the BoC warned that inflation in the short-term is more likely to get worse before it gets better, and the bank stressed the point it will act more forcefully if needed. It is clear the BoC are determined to try and keep a lid on inflation. GBP/CAD and EUR/CAD are firmly in the red, while USD/CAD is only a touch down on the day, but that is because the US dollar index is up 0.6%.

Brent crude and WTI are both up by over 1% following yesterday’s announcement from the EU that it will ban Russian oil imports. The embargo is not as comprehensive as many had predicted, which is why the oil market has yet to retest the peak that was set yesterday. Gold is a touch lower on account of the sharp gains made by the US dollar.

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