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LGT Navigator: The Fed's next interest rate move casts its shadow ahead

June 14, 2022

Latent inflation, interest rate and recession worries weighed heavily on the stock markets and caused a negative start to the week. On Wall Street, prices slumped ahead of the Fed's next interest rate move. Once again, shares of technology companies came under pressure. Meanwhile, interest rates on the US bond market continue to rise sharply and the US dollar is benefiting from the prospect of rapidly rising interest rates.

The Fed's next interest rate move casts its shadow ahead

In New York, the stock indices again came under heavy pressure at the start of the week. The Dow Jones Industrial fell by -2.79% to 30,516.74 points and traded at times at the lowest level since February 2021. The S&P 500 closed at 3,749.63 points, -3.88% lower than on Friday and thus at the lowest level since March 2021. Ahead of the expected further interest rate hike by the Fed, the indices on the Nasdaq technology exchange slumped by -4.6%. The Nasdaq 100 thus falls to the lowest level since November 2020.

In Asia, most stock markets are also trading in negative territory. In Tokyo, the Nikkei 225 falls by around -1.6%. In Hong Kong, the Hang Seng Index trades around -0.5% lower, while in Shanghai, the Composite Index loses about -0.8%. 

In the bond market, the yield on ten-year US Treasuries rises sharply to 3.37% - the highest level in over eleven years. In the foreign exchange market, the US dollar benefits from the prospect of rapidly rising interest rates. The greenback almost reached the 1.04 mark against the euro.

British industry pessimistic about the future

According to the Confederation of British Industry (CBI), the outlook for industry in Great Britain has clouded over significantly. As a result, the industry association lowered its economic forecasts. Economic growth of +3.7% is now expected for 2022, compared with the previous forecast of +5.1%. And next year, too, the British economy is likely to grow significantly less strongly than recently assumed. For 2023, the GDP growth rate is expected to be +1.0% - previously +3.0%. Companies are suffering from rising costs and consumers from price increases. It would not take much for the UK to fall into recession, commented CBI Chairman Tony Danker.

Gap between rich and poor widens

According to the UN, poverty has increased worldwide. At the same time, the poorest 20% of the world's population are experiencing massive income losses due to the Corona pandemic and are also suffering the most from the effects of climate change. According to the UN High Commissioner for Human Rights, Michelle Bachelet, inequality in the world is the highest it has been in more than 100 years. At the same time, the wealth of the rich around the world increased sharply last year, mainly thanks to higher stock prices. According to calculations by the consulting firm Capgemini, wealth in 2021 rose by +8% year-on-year to a record EUR 82 trillion.

Economic Indicators June 14

MEZ Country Indicator Last period
08:00 UK Unemployment Rate (April, m/m) 3.7%
08:00 GE Consumer Prices (May, y/y) +8.7%
11:00 GE ZEW Economic Perspectives (June) -27.5
11:00 EZ Industrial Production (April, m/m) -2.0%
14:30 US Producer Prices (May, y/y) +10.9%
14.30 US Core Producer Prices (May, y/y) +8.6%


Earnings Calender June 14

Country Company Period
SZ Swiss Re Media Day


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Source: LGT Bank (Switzerland) Ltd.

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