For the month of June 2022, the recession narrative has become more admitted and likely to happen.
Under the Fed action, the fund rate is expected to climb to 3.5% by the end of 2022 – that is roughly 2.6 hikes of 75bps to go from the current 1.75%. The US10Y yield traded most of the time above the 3% threshold. It gained 17bps to 3.01% and touched a high at 3.49bps.
On the ECB’s end, the tightening program highlights the disparity in euro area. The Greek, Italian and Spanish 10Y yield spreads relative to the German benchmark climbed to 2.9%, 2.4% and 1.35% respectively on the 14th of June. To sustainably contain these deteriorating financing conditions for Southern economies, the mechanism of the antifragmentation tool needs to be known. The CDS on the EUR HY climbed above 600bps for the first time since March 2019.
On the fixed income side, the trading activity was dominated by US treasuries from 1 to 10Y.
On the equity side, all developed economies indices were in negative territory while the MSCI China increased by 5.7%. The gradual reopening of the country as well as the greater PMI reading in May – at 48.4 vs 42.7 in April – and the supportive PBOC created a positive impact.
Equity Indices: STOXX 600 BANK: -9.80%, NDX: -9.00%, MSCI WORLD: -8.77%, SX5E: -8.82%, SPX: -8.39%, STOXX 600: -8.15%, FTSE100: -5.16%, MSCI JAPAN: -2.87%
Bonds: German 10Y yield: +21.4bps, US10Y Yield: +16.9bps
Commodities: Gold: -1.64%, Oil: -7.77%, Wheat: -19.45%, Natural Gas: -33.41%
FX: DXY: +2.88%, USDJPY: +5.48%
From a regional perspective, European equities as well as US and International DM indices were sold. On the fixed income side, US Treasuries were in demand.