Stock Market Overview: What Should We Expect?

The European stock market fell and the dollar continued to strengthen. New restrictions to curb the spread of the virus in China added to investor concerns about the global economy’s health. 

The Stoxx Europe 600 was down 0.6% in early trade after Chinese shares fell sharply amid new Covid-19 restrictions. Germany’s Dax fell 0.8%. USD/JPY hit a fresh 24-year high, buying 137.3 yen. The dollar was also near par against the euro, down 0.6% at $1.012. News of China’s renewed lockdown added to investor concerns about the outlook for the global economy. This could dampen demand and disrupt global supply chains.

On Friday, markets expected the Federal Reserve to continue aggressively raising interest rates in response to stronger-than-expected monthly jobs data. Markets expect the Fed to raise interest rates by 0.75 percentage points at its July meeting to curb inflation.

 Its latest move was a 0.75 percentage point rate hike in June, the largest since 1994. Futures markets are pushing the U.S. funds rate to a high of 3.54% in March next year. U.S. employers hired 372,000 new workers in June, beating the median forecast of 265,000. Economists also expect last month’s inflation data, released on Wednesday, to show consumer price inflation rising at an annual rate of 8.7%.

What Does Goldman Sachs Say About Stock Market?

But while both data points could strengthen the Fed’s resolve to keep raising rates, Goldman Sachs strategist Jan Hatzius said in a note to clients that there is no doubt that the job market is slowing as many listings Companies have announced hiring freezes or slowing down.

 Goldman Sachs sees a 30 percent chance of a U.S. recession in the next 12 months and a 50 percent chance of a slowdown in the next two years.

The yield on 10-year German Bunds fell 0.05 percentage points to 1.29% as the euro zone’s benchmark debt rose. The 10-year U.S. Treasury note yield, which supports global debt pricing, fell 0.04 percentage points to 3.06%. Futures markets implied that Wall Street’s S&P 500 index fell 0.6% in the first few trades in New York last week after the index rose after its worst first half in more than 50 years.

Asian Stocks, more precisely, Hong Kong’s Hang Seng fell 2.8% in Asia, and mainland China’s CSI 300 lost 1.7% after Chinese cities reinstated coronavirus restrictions to combat the spread of the highly contagious BA. 5 subvariants of the Omicron coronavirus. Tokyo’s Topix rose 1.4% on Monday after Bank of Japan Governor Haruhiko Kuroda warned that Japan’s domestic economy is “very uncertain,” sending a strong signal that the central bank is following global trends and that rate hikes will continue to be ignored.