European Stocks Drop; Powell’s Testimony; PMI Data
European stocks weakened on Thursday. Risk sentiments are fragile due to growing fears of a global recession, Against the backdrop of an aggressive rise in interest rates by the Federal Reserve. The DAX traded down 1.6%. CAC 40 by 1.5% and FTSE 100 by 0.9%. Data released on Thursday showed that business activity in the two largest economies of the eurozone, France and Germany, suffered sharp losses at the end of the second quarter, which raises concerns about an economic slowdown in the region.
France’s primary services sector fell to a five-month low in June. Also, the Quick Purchasing Manager Index dropped to 54.4 points. The French manufacturing sector flash PMI index also decreased to 51.0 points, the lowest level in 19 months. In Germany, the services PMI flash became 52.4 in June. The production index was lowered to 52.0.
European capital indexes received a weak transfer; After the chairman of the U.S. Federal Reserve said the central bank was firmly committed to reducing inflation. In addition, Powell said that a recession is certainly possible. The narrative in the financial markets seems quite clear. Inflation should consider, and given that supply, factors do not show signs of easing, Central banks will have to remove demand by tightening monetary policy. Analysts estimate that this slowdown will turn into a soft downturn or a recession, it’s clear. The ongoing war in Ukraine compounds concerns in Europe; Sanctions imposed on Russian crude oil and rising gas prices as Moscow cuts supplies.
Stocks and Economy
Germany intends to launch the second phase of its three-phase plan; To ensure delivery security. The country is reportedly approaching a rational supply of natural gas, fearing a complete cessation of supplies from Russia. Oil prices fell on Thursday, which continues to sell last. There are concerns about monetary tightening by the Federal Reserve; since stopping strong inflation will lead to a sharp economic slowdown in the U.S., the world’s largest consumer of crude oil.
In addition, President Joe Biden called on Congress to adopt a three-month moratorium on federal gasoline taxes to help with pump prices. According to reports, 5.6 million barrels were increased in the week ended June 17.
The U.S. crude oil futures traded down 1.8%. Brent’s contract fell 1.4% to a total of $110.13. In the previous session, both benchmarks fell by about 3%, the lowest level since mid-May. In addition, gold futures rose 0.1% to $1839.60/ounce. EUR/USD fell to 1.0506.