MILANO – The financial markets are trying to breathe after the Black Monday that saw the S & P500 on Wall Street fall below the 4 thousand point mark for the first time since March 2021, while the technology sector has given new evidence of suffering with the Nasdaq that has lost over 4 percentage points. The toxic mix for investors is always the same as in recent weeks: the fear of too high inflation that leads the Fed and other central banks to tighten monetary policy in an accelerated way, while on the horizon there are many factors of uncertainty on the global economic trend and already persistent problems such as the war in Ukraine and the Chinese lockdowns due to the resumption of Covid infections. In a few, note the Wall Street Journal, believe that there is a recession at the gates: the labor market continues to show signs of strength, companies would like to hire even more but there is a lack of employees and therefore wages are rising, unemployment is at its lowest for half a century. But the ranks of skeptics are still growing, with 28% of the economists on the panel of Wsj which expects a slowdown in the next twelve months, from 18% in January.
For the moment, the indications of the day are for respite: futures on Europe and the United States rise after the Asian indices have contained the damages. “Investors need to be prepared for continued volatility for now,” Solita Marcelli, UBS Global Wealth Management’s America Investments Head, wrote in a comment, adding that investor sentiment is almost in bearish mode. , even if it hasn’t completely relented.
In the morning, the Tokyo Stock Exchange limited damage by losing 0.58%.
Last night there Federal Reserve launched new alerts saying that the volatility of the stock and commodity markets, with high inflation and the war in Ukraine are among the main risks for the US financial system. In the semi-annual report of the US central bank on financial stability, the rapid rise in US interest rates, wars related to oil markets and other factors are said to have already strained parts of the financial system; although the ‘stress’ “has not been as extreme as in other episodes in the past, the risk of sudden and significant deterioration appears higher than normal”.
Special attention is paid to it spread between BTPs and German Bunds after the yield of the Italian ten-year firmly set foot above 3% and the spread widened to around 200 basis points.
Among commodities, the decline in prices continues petrolium on Asian markets due to concerns about demand, while restrictions continue in China, the main oil importer, due to the spread of the Coronavirus. Brent crude oil lost 1.09% to 104.79 dollars a barrel; US crude West Texas Intermediate fell by 1.04% to 102.04 dollars a barrel. Both contracts collapsed by around 6% yesterday but are still up by around 35% since the beginning of the year.
Coming to the data of the day, we report the estimates of the European Bank for Reconstruction and Development according to which the Ukrainian economy is set to contract by nearly a third this year, following the invasion of Russia. Ukraine’s production will drop by 30%, against a 20% slump expected in March. The European Bank for Reconstruction and Development stressed that Ukraine’s economy will rebound by 25% in 2023, more than its March forecast of 23%. According to the EBRD, Russia’s economy will contract 10% this year and will have zero growth next year, estimates unchanged from March.