S&P500
The US stock market is trading at the same levels after a sharp increase. Investors are fettered by risks from Europe.
The main US stock indices declined moderately on Tuesday, holding at the current levels ahead of crucial economic reports. The Dow lost 0.7%, the NASDAQ dropped by 0.4%, and the S&P 500 sank by 0.6%.
The S&P 500 was trading at 4,132, moving in the range of 4,090 - 4,170.
The US revealed the Consumer Confidence Index survey. The reading totaled 106.4, down from last month. Nevertheless, it exceeded forecasts. The House Price Index came in at 21.2%. the figure was higher than last month. Thus, the housing market in the United States remains overheated.
As for the housing market in China, new home sales dropped in May due to a drastic rise in mortgage interest, a downturn in the economy, and household incomes. In addition, the growth of home prices has been outpacing the growth of household incomes for a long time. Construction companies have huge loan debts. Many firms may go bankrupt if governments do not support them.
US inflation: US President Joe Biden and Fed Chair Jerome Powell held a meeting to discuss historic inflation. Treasury Secretary Janet Yellen was also present at the meeting. Inflation in the US has almost reached 8% in annual terms. This is a four-decade high. However, in May, there were optimistic reports about a noticeable decrease in inflation in April. The Fed plans to raise the key rate by 0.5% at the next two meetings. Yellen admitted that a year ago she underestimated the risk of inflation growth.
Commodity market: Oil is trading at high levels. Brent Crude is worth $116. Russian gas producer Gazprom cut off gas supplies to Denmark from June 1. Yesterday, the EU adopted the sixth package of sanctions against Moscow. The package includes a ban on buying Russian oil from tankers. EU allies also discussed a plan to reduce imports of Russian crude oil by 90% by the beginning of 2023. The EU also disconnected Sberbank from SWIFT. It may impact the oil market. The EU and the UK agreed to a coordinated ban on insuring ships carrying Russian oil. It will dramatically complicate the supply of oil from Russia to third countries. "Russia should cut oil production by 20%-30% to 7 million-8 million barrels per day (bpd) to get a better price and avoid selling it at a discount," Leonid Fedun, the vice-president of Lukoil, said. The Russian budget is significantly dependent on taxes on oil and gas exports. In April, VAT revenues fell by more than 1.5 times compared to April last year despite soaring oil prices worldwide. The Russian authorities reduced the export duty on oil from June 1 by $4.8 to $44 per ton.
Food crisis: Ukrainian ports have been blocked since the start of the special military operation, leaving more than 20 million tons of grain stuck in silos.
The crisis in Europe is currently one of the main threats to global markets. Analysts are also worried about galloping inflation in Europe. In Germany, it soared to 8%. Rising energy and food prices may also cause an economic downturn in the coming months. Economists believe that if the ECB hikes the key rate, it may worsen the situation.
Conclusion: it is recommended to buy shares after a sharp rollback.
The Russia-Ukraine conflict: Russian military forces continued attacks on Severodonetsk. Russian forces might have already taken control of the city. Zelensky announced for the first time since the beginning of the conflict daily military casualties in Eastern Ukraine. Near 60-100 people are killed per day and up to 500 wounded.
The Russian negotiators have made significant progress. The main EU countries halted military assistance to Ukraine, especially Germany and France. Mario Draghi confirms Italy's full support for Ukraine's accession to the EU. He also added that France and Germany are opposed to Ukrainian membership in the EU. It appears that the EU wants Kyiv to make territorial concessions to Russia in order to end the conflict. This move is severely criticized by both politicians and Ukraine.
