Global Markets Update Monday, 1 August 2022

European gas prices soared after Russia further reduced European gas supply through its Nord Stream 1 pipeline, taking it to just 20% of expected levels. The TTF contract reached a fresh record of €220 a megawatt hour, more than double the level in early-June and surpassing the previous peak in the immediate wake of Russia’s invasion of Ukraine.

The IMF slashed its global growth forecasts, saying global GDP was now expected to expand 3.2% in 2022, compared to 3.6% in April and roughly half the pace of last year’s expansion.

Global equities closed July with strongest returns since late-2020, helped by easing rate expectations and upbeat earnings from major tech companies.


The FTSE 100 rose 2.0% over the week.


The S&P 500 surged 3.3% over the week, closing July with a gain of 9.1% – the best monthly performance since November 2020. Better-than-expected earnings by major tech companies boosted hopes for withstanding the economic slowdown and higher rates, while slowing growth lifted speculation that inflation will moderate, helping the Federal Reserve (Fed) to slow the pace at which its raises rates in the medium to long term.

US GDP shrank by an annualised 0.9% in the second quarter, following a 1.6% contraction in the first quarter.

The Fed raised rates by 75 bps to a range of 2.25%-2.5%, a level considered to be neutral for economic growth. Fed chair Jay Powell said that he thought a recession was unlikely given the strength in the job market but indicated that it “likely will become appropriate to slow the pace of increases”. He also said “another unusually large rate rise” would be implemented if inflation data warranted a more hawkish approach. Futures pricing implied the Federal funds rate would peak at 3.2% in February 2023, compared to predictions of 3.9% in mid-June.

The Conference Board’s US consumer index fell to 95.7 in July, the third straight month of decline.

The University of Michigan’s consumer sentiment index improved slightly to 51.5 in August from July’s all-time low of 50.

The core PCE index, the Fed’s preferred measure of inflation, accelerated to 4.8% in June of 2022 from 4.7% in May.

Walmart issued its second profit warning in 10 weeks as it said rising prices for fuel and food were weighing on demand for less essential items such as clothing. Microsoft missed analysts’ forecasts for quarterly revenue and earnings but said its cloud computing business remained robust. Amazon beat analysts’ quarterly revenue forecasts and gave an upbeat outlook for the rest of the year because of the strong performance of its cloud computing business. Apple and Google parent Alphabet issued more confident outlooks than investors had expected. Meanwhile, ExxonMobil and Chevron reported record quarterly profits thanks to surging oil and gas prices.


The FTSEurofirst 300 jumped 2.9% over the week.

Eurozone GDP grew 0.7% in the second quarter, far stronger than the 0.1% growth rate that had been expected. Tourism helped to spur growth in France, Italy and Spain, but Germany experienced flat growth.

Eurozone inflation hit a fresh high of 8.9% in July, up from 8.6% in June, while core inflation rose to 4.0% in July from 3.7% in June.

The Ifo Institute’s index of German business confidence fell to a two-year low of 88.6 in July, down from 92.2 in June amid the threat of gas shortages.

German inflation rose to an all-time high of 8.5% in July.

The EU agreed to cut gas use by 15%.


The Nikkei 225 slid 0.4% over the week.

Pacific Basin

China’s official manufacturing PMI unexpectedly fell to 49.0 in July, down from 50.2 in June. Meanwhile, the non-manufacturing PMI slid to 53.8 in July from a 13-month high of 54.7 in June, reflecting rising COVID-19 infections and renewed curbs in some cities.

Taiwan’s economy expanded 3.08% year-on-year in the second quarter, moderating from a 3.14% expansion in the previous quarter. It was the slowest rate of growth in two years amid a resurgence in coronavirus infections domestically and in mainland China, which caused major disruptions to supply chains and hurt demand for Taiwan exports.

Emerging Markets

The National Bank of Hungary raised rates by 100 bps to 10.75%, following a 200 bps hike earlier in the month.  Prime minister Viktor Orban has been forced to make compromises with the EU so as to unlock access to €15bn worth of pandemic recovery funds. These include fighting corruption and decoupling Hungary’s energy system from Russian imports. Meanwhile, concerns over the size of Hungary’s budget deficit have led to the suspension of parts of the populist agenda, including household utility price caps and low small business taxes.

The Mexican economy expanded 1.0% in the second quarter, the same growth rate as seen in the first quarter.


The yield on the 10-year US Treasury bond closed the week down 26bps at 2.69%.

The yield on the 10-year German Bund closed the week down 39bps at 0.83%.