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Recession Concerns Send US Stocks Lower, European Stocks Sharply Lower

London, Thursday, 16 June 2022

US Markets Summary

Investors evaluated the potential economic implications of the Federal Reserve's prolonged war against inflation, and stocks in the United States fell on Thursday.

The S& P 500 index dropped more than 3.8 percent, reaching its lowest intraday level of the year. It too lost ground after climbing 1.5 percent the day before.

On an intraday basis, the Nasdaq Composite dropped as much as 4.6 percent, bringing the index's year-to-date loss to 32 percent.

The Dow Jones Industrial Average fell more than 900 points, or more than 3%, and the 10-year Treasury yield fell to around 3.34 percent.

The Summary of Economic Projections (SEP) released by the Federal Open Market Committee (FOMC) on Thursday revealed that the committee now anticipates a less bright economy ahead as it continues to raise interest rates.

The FOMC currently forecasts that the unemployment rate will be 3.7 percent by the end of the year (down from 3.5 percent in March) and that real gross domestic product would rise by only 1.7 percent (versus the 2.8 percent increase seen previously).

The Fed also upgraded its expectations for core inflation at the end of the year and where the Fed funds rate will end in 2022.

European Markets Summary

Higher borrowing prices, combined with central banks' promise to contain inflationary pressures, exacerbated recession fears on Thursday, with the Dax plunging 3.2 percent to three-month lows.

The Fed raised rates for the first time since 1994, the Bank of England raised the Bank Rate for the seventh time in a row, and the Swiss National Bank stunned markets by lifting its policy rate for the first time since 2007.

Shares of online apparel companies ASOS and Zalando plunged 32% and 14%, respectively, after the former warned that inflationary pressures were hurting shopping behaviour.

Utilities have also suffered as a result of Gazprom's significant reduction in gas shipments to Germany and Italy, despite the Nord Stream 1 pipeline being at 40% capacity. E.ON's stock has dropped 7%, while Eni's has dropped roughly 5%.

(Source: Trading Economics and Yahoo! Finance // Edited by: The Decision Maker – Finance editors)


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