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Stock rally stalls

Equity markets traded lower Tuesday as it appeared a solid rally in the second quarter of the year had lost its steam. Last week’s hawkish outlooks by officials from the Federal Reserve (Fed) and European Central Bank (ECB) as well as the prospects of further rate hikes from the Bank of England and Swiss National Bank on Thursday were dampening market sentiment.

Shane Strowmatt, LGT
Reading time
5 minutes
Falling market
© Shutterstock

In New York, stock markets dropped on Tuesday after starting the week a day late due to a federal holiday. The Dow Jones Industrial, which had reached a high for the year on Friday before losing the gains, fell 0.72% to close at 34'053.87 points on Tuesday. The S&P 500 lost 0.47%, closing at 4388.71 points, its first back-to-back trading sessions in the red in nearly four weeks. The Nasdaq-100 fell less than the other major US indices, but still ended the day 0.09% lower at 15'070.15 points. In individual stocks, Tesla gained 5.3% on Tuesday after electric vehicle startup Rivian said it would adopt Tesla’s charging standard. Tesla’s network is slowly becoming the standard in the US after car manufacturers General Motors and Ford also said they would adopt the company’s charging standard.

In macroeconomics, data released Tuesday showed a strong housing market in the world’s largest economy, despite fears of an economic downturn. US housing starts increased 21.7% to 1.63 million, the highest level in more than a year. A strong housing market could hamper the Fed’s goal of lowering inflation.

Stock markets in the Asia-Pacific region followed the negative sentiment out of New York and were trading lower on Wednesday. Hong Kong's Hang Seng Index was trading 2% lower. In mainland China, the Shanghai Composite lost 0.5%. South Korea’s Kopsi was down 0.6%. Japan’s Nikkei 225 bucked the trend, trading up 0.7% higher on Wednesday.

In Europe, markets will keep a close eye on the Producer Price Index and Consumer Price Index coming out of the UK on Wednesday, one day before the Bank of England is schedule to announce its interest rate decision. The central bank is battling stubbornly high inflation which is still nearly 9%, much higher than in most other developed nations.

Corporate news in focus: Volkswagen Capital Markets Day, Ebay annual general meeting.

Economic data in focus: UK producer and consumer prices (08:00 CET), weekly US API oil report (22:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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