Euro and oil plummet, markets smell disaster: what’s happening

Sandro Iacometti

Euro, oil, inflation, stock exchanges. Today maybe the clear sky returns and we all breathe a sigh of relief. It is difficult, however, to ignore what happened yesterday. The signals from the markets that seem to have sensed the imminent disaster are too many and too strong. The first alarm was triggered by the trend of the European currency, which began to slide since the beginning of the session, and then closed at 1.024 dollars, down by 1.72%. To get an idea of ​​what this means, just think that this is a level that has not been seen since the end of 2002 and that the daily decline is the greatest since the beginning of 2020 and the beginning of the Covid-19 pandemic.

Negative records that come after a series of declines that characterized all the first months of the year, with an overall decline of about 9.8%. Investors are frightened by the winds of recession blowing in Europe, with the continuous upsurge of gas and electricity that will keep inflation at high levels for a long time, which pushes purchases of the dollar as a safe haven. The “fear” of a slowdown, admitted the German economy minister Robert Habeck, “in the imminent future is extraordinarily great”.

CENTRAL BANKS
Not that they fare better in the US. Everyone is betting that the US central bank will continue to raise interest rates, holding back the economy, in an increasingly aggressive way to fight a rise in prices that does not seem to want to take a step back. In May, according to the OECD, trend inflation in the area rose from 9.2% in April to 9.6%. The index rose in all countries except Colombia and Japan, Luxembourg and the Netherlands.

Hence the markets’ belief that the recession will spread far beyond the Old Continent. A prospect, that of a global collapse in demand and production activity, immediately rebounded on oil prices. Also thanks to a forecast by Citrigroup analysts, according to which a reversal of the economy could bring the price of a barrel down to $ 65 or more. A forecast that triggered a flurry of futures sales that added to those already in place. Result: the Wti Texan barrel collapsed by 9%, slipping below 100 dollars (98.56 dollars), worse did the Brent, which fell by 10.11% to 102.04 dollars.

The storm on currencies and commodities has overwhelmed all the exchanges. Those of the Old Continent closed the session with heavy thuds. Piazza Affari which saw the Ftse Mib index leave 2.99% on the ground at 20,705.06 points and the All Share in the red of 2.91% at 22,681.71 points. Frankfurt is also decidedly down (Dax -2.91%), There is expectation for today’s minutes of the June Fed meeting, although traders are already preparing for a new rate hike of 75 basis points at the end of the month. The Dow was down 1.84% early in the session, the S&P 500 1.57% and the Nasdaq 0.38%. And as the markets go upside down due to the risk of a global recession, we are starting to do the first accounts of inflation. The disposable income of families in the first quarter of the year, according to data released yesterday by Istat, increased by 2.6% compared to the previous quarter.

However, due to the generalized increase in prices, the purchasing power of households only increased by + 0.3%. While households’ propensity to save was 12.6%, an increase of 1.1 percentage points, against a weaker growth in final consumption expenditure than that of disposable income. In short, the Istat numbers confirm the difficulties faced by families in making ends meet, with the high cost of living having eaten up all the potential increases. The only thing that never goes down is the taxes. In the first quarter, the tax burden was 38.4%, an increase of 0.5 percentage points compared to the same period of the previous year. While in the first five months of the year, the State’s revenues grew by 10.9%, with an increase in revenue of over 18 billion. London (Ftse 100 -2.86%), Paris (Cac 40 -2.68%), Madrid (Ibex 35 -2.48%). Wall Street is also negative, unable to raise its head after the long weekend of Independence Day.

WALL STREET
Today’s minutes of the June Fed meeting are awaited, although traders are already preparing for a new rate hike of 75 basis points later this month. The Dow in the first phase of the session was down by 1.84%, the S&P 500 by 1.57% and the Nasdaq by 0.38%. And as the markets go upside down due to the risk of a global recession, we are starting to do the first accounts of inflation.

The disposable income of families in the first quarter of the year, according to data released yesterday by Istat, increased by 2.6% compared to the previous quarter. However, due to the generalized increase in prices, the purchasing power of households only increased by + 0.3%. While households’ propensity to save was 12.6%, an increase of 1.1 percentage points, against a weaker growth in final consumption expenditure than that of disposable income. In short, the Istat numbers confirm the difficulties of families in making ends meet, with the high cost of living having eaten up all the potential increases.

The only thing that never goes down is the taxes. In the first quarter, the tax burden was 38.4%, an increase of 0.5 percentage points compared to the same period of the previous year. While in the first five months of the year, the State’s revenues grew by 10.9%, with an increase in revenue of over 18 billion.

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Euro and oil plummet, markets smell disaster: what’s happening


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