North America
The S&P 500 was lifted out of bear market territory, erasing losses from the week as signs of slowing inflation helped by dipping energy prices gave way to a relief rally. The S&P 500, Nasdaq composite and Dow Jones industrial average rose by 5.79%, 7.49% and 5.42% respectively. Data pointing to slowing economic growth across the US was interpreted as positive news, with lower levels of growth allowing for easing of inflationary pressures. One such measure came from the Chicago Federal Reserve reporting an 8-month low on its gauge of national economic activity. In addition to this, S&P Global’s Manufacturing PMI (Purchasing Managers Index) also came below estimates in June (52.4, below estimate of 56). S&P’s services gauge also missed estimates, reaching its lowest levels in 6 months. Investors widely expect benchmark rates to reach 3.5% this year. Fed Chair Jerome Powell added to this, stating that the US economy is currently very strong and able to withstand tighter monetary conditions. Powell also warned that inflationary surprises could still derail progress, adding that a recession still remained “a possibility”. This comes after the Fed raised its main interest rate by 0.75% the week before – the highest hike since 1994, with Inflation reaching a 40-year high of 8.6% in May. Adding to this, Treasury Secretary Janet Yellen said that she expects the U.S. economy to slow in the months ahead, but added that a recession is “not inevitable” and can be avoided. Yellen also spoke of consideration to a federal gasoline/petrol tax holiday, in hopes of helping vehicle owners. Many lawmakers have discussed the proposition, with the average gasoline price reaching $5 per gallon across the nation. Tax currently sits at $0.184 per gallon. Following the monetary tightening estimates, the International Monetary Fund (IMF) revised downwards its forecast for US economic growth from 3.7% in April to 2.9% (June) in 2022, citing elevated energy prices and tighter monetary policies as the key deterrents to economic growth.

Europe & UK
European indices rose with their US counterparts, marking a departure from their 3-week losing streak. The Pan-European STOXX 600, French CAC 40 and British FTSE 100 rose by of 2.40%, 3.24%, 2.74% respectively. The German DAX closed flat as Germany warned of an economic slowdown, with officials warning of a harsh winter as gas reserves continued to decline. The German Economic Ministry announced the start of the second phase of its three -phase emergency energy plan, with Russia systematically reducing gas deliveries. The second phase, known as the “alarm phase” allows utility firms to pass the higher energy costs onto customers, in an attempt to reduce demand. enables utility firms to pass on high gas prices to customers and thereby help to lower demand. German officials remain considered, as the 13th of July marks a 10-day closure of the Nordstream 1 pipeline, as a part of standard annual inspection. Some worry of a total stop of gas exports to Germany from Russia after this date. Germany relies on Russia for approximately 35% of its total natural gas imports, pushing the nation along with Austria and Romania to reopen some coal plants. Compounding this concern, the EU’s largest economy saw a drop in economic momentum, the German flash PMI falling to 52.4 in June from 55.0 in May. The flash PMI reading for the Eurozone recorded similar drops, reaching its lowest level since the beginning of 2021 at 51.9 for June (dropping from 54.8 in May). The PMI decline was underpinned by an overall drop in consumer confidence, having tumbled -23.6 points in June according to the European Commission (EC). Officials in the UK expressed concern over continuing price pressures, inflation having accelerated to 9.1% in May – marking the highest levels in 13 years. Meanwhile, Russia defaulted its’ on foreign debt for the first time in over a century following the lapsing of two major international bond payments on Sunday. The $100million interest payment was originally due on the 27th of May, with Russia’s attempts to pay in its ruble currency blocked by international sanctions.

Japan
Japanese indices recorded positives across the week, boosted by the Bank of Japan’s’ (BoJ) commitment to maintain its current easy monetary policy regime. The Nikkei 225 gained 2.04%, followed by the TOPIX composite closing 1.68% higher. The recent release of the BoJ’s April monetary policy meeting minutes show that policy members attribute the banding of inflation readings towards the BoJ goal of 2% to the larger increases in energy and food costs, expressing that more can be done by the bank to bring inflation higher (Japan experiencing a largely deflationary environment). With this agreed, members opted to maintain the current policy stance, adding that increasing COVID cases and rising inflation & interest rates in the nations of major trading partners present headwinds to their overall goals. Japan’s core CPI recorded a 2.1% year-on-year in May, exceeding the BoJ’s 2% goal for a 2nd month.