US markets declined, with the Dow Jones down -6.7% and S&P500 down -8.4%, amid worries the Fed will plunge the economy into a recession, with gap between default swap spreads of high-grade companies and their junk counterparts, a recession-signalling indicator, jumping the most since 2020.
Long-dated U.S. treasury yields were higher, with the 2-Yr yield at 2.96% and 10-Yr yield at 3.01%.
EUROPEAN MARKETS
European markets declined with the Stoxx Europe 600 Index down -8.2%, UK FTSE down -5.8% and German DAX down -11.2%, after ECB revised its baseline euro area inflation projections up significantly with 2022 annual inflation at 6.8% (core at 3.3%), up +170bps, 2023 at 3.5% (core at 2.8%), up +140bps and 2023 at 2.1%, up +20bps, and downgraded 2022 and 2023 annual real GDP growth forecast to 2.8% (down -90bps) and 2.1% (down -70bps), respectively, while upgrading 2024 forecast by +50bps to 2.1%, based on which the Governing Council intends to raise the key EWCB interest rates by +25bps at its July monetary policy meeting with further raise expected in September.
ASIAN MARKETS
Asian markets were mostly lower, with the Shanghai Composite up +6.7% amid China’s economic reopening from Covid-19 lockdowns and bets that China will continue to keep monetary policy loose to boost growth with Chinese banks keeping key lending rates unchanged, with 1-year LPR at 3.7% and 5-year LPR, a reference for mortgages, at 4.45%. The Nikkei wad down -3.3% and KOSPI fell -13.2%.
COMMODITIES
WTI oil price declined -5.5% to US$105.8/bbl, as concerns of a decline in supply amid Libya halting oil exports from key ports due to political crisis were more than offset after OPEC+ ratified an oil-production increase that completes the return of supplies halted during the pandemic, rubber-stamping plans to add 648k barrels a day in August.
