In this week’s Recap, Marcello talks about the widespread collapse of the markets around the globe; Inflation is reaching a new high; we might be facing the start of a recession.
World stock markets had the biggest weekly decline since a pandemic-induced meltdown in March 2020, hit by growing worries about an economic recession after interest rate increases in the United States & the U.K. which was followed by a surprise move at Switzerland’s central bank, to quell an inflation surge.
Euro-zone inflation rose to a record high of +8.1% last month in line with preliminary estimates & more than 4X the European Central Bank’s target & underscoring its plans to raise interest rates in July & succeeding months to tame runaway price growth. Initially driven by post-pandemic supply shortages & soaring energy prices following Russia’s invasion of Ukraine, inflation has now become increasingly broad, affecting everything from food & services to everyday goods.
The Commerce Department stated on Wednesday that U.S. retail sales fell by -0.3% last month, down sharply from April’s downwardly revised +0.7% increase, following the +0.9% initially reported. It marks the 1st decline in 5 months. U.S. retail sales registered a bigger-than-expected drop in May, as motor vehicle sales plunged & record gasoline prices prompted households to cut back spending on other items.
Russia stepped up use of energy as a geopolitical weapon, by making further cuts of natural gas shipments via its biggest pipeline to Europe. Germany accuses Russia of trying to further drive-up prices. Gazprom PJSC is curbing gas supplies via its Nord Stream pipeline to Germany by 60%, increasing an initial cut to Europe’s top buyer announced Tuesday. It adds to a 15% reduction in flows to Italy, continent’s 2nd-largest customer of Russian gas.
Ukrainian grain shippers have rerouted exports via the Baltic Sea to send their crops abroad. The country has been hunting for alternative paths, as the war with Russia cuts off vital global shipments from ports dotting the Black Sea, thus raising global food prices. Producers have resorted to sales by land instead, ferrying grain by railway, to European Union neighboring country ports.
Russian crude flows by sea are taking on a new pattern as the government seeks to deal with impending European sanctions on its exports. India has moved from being an insignificant buyer of Russian crude to the 2nd-biggest destination for shipments, behind only China. Asian buyers, dominated by China & India, are now taking close to 50% of all the crude shipped from the country’s ports.
The Bank of England raised interest rates again, for the 5th time since December; Coinbase Global will be laying off 18% of its workforce; Crypto lending firm Celsius pauses withdrawals and transfers; German inflation accelerated to a 5-decade high of +7.9% year on year in May.
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