A wild ride

It’s been another wild ride in the markets this week but indices are on course to end it roughly where they started.

There has been a lot to digest this week, not least from companies themselves, with big tech the focus on the earnings front. We’re continuing to see some decent reports, albeit with the odd blip along the way.

Amazon was the latest to catch Wall Street off guard, reporting its first loss since 2015 amid a multitude of challenges facing the company. There were the usual strong points to the report, like the cloud and advertising businesses – although the latter did fall a little short of expectations – but like many others, the company is struggling to adjust to post-pandemic life having scaled up massively over the last couple of years.

There is a feeling that investors have had one eye on the Fed meeting next week which may be why we haven’t seen a big sustainable move either way. The dollar has pared gains today but it has been flying this week and it’s hard to see a strong case for that to reverse in any significant way. I can’t imagine the Fed is going to tone down its hawkish rhetoric next week.

The EU response to Russia cutting off gas supplies to Poland and Bulgaria hasn’t been as unified as we’ve seen in recent months. There’s been a desperate scramble to work out which companies can comply with sanctions while keeping the gas flowing, something the Kremlin will be delighted to be witnessing.

Eurozone CPI hits 7.5%

Higher energy prices are a major driver of inflation in the euro area and that is unlikely to change any time soon. Inflation hit a new record high of 7.5% in April, while the core measure hit 3.5%, beating expectations. That’s going to increase the pressure on the ECB to tighten this year even if it appears to be peaking. The market is pricing in multiple rate hikes this year, something the central bank has pushed back against. The meeting at the start of June is now huge. No room for ambiguity from Christine Lagarde this time.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

dollar
inflation
markets
fed
central bank

Author: Craig Erlam