Zurich Weekly Investment News 04.07.2022

Weekly Investment News

Stocks fell last week as economic data releases failed to meet expectations. In the US, the closely watched personal consumption expenditures release showed that consumers were beginning to pull back, with May seeing the first decline of 2022. Consumer sentiment also moved lower, with the June release showing the lowest reading for future expectations in nearly a decade. Resulting equity sector moves were as expected, with consumer discretionary and tech fairing worst, whilst more defensive segments such as utilities and consumer staples held up best.

Government bonds rallied as investors began to worry less about inflation, and more about future economic prospects. However, inflation continues to remain elevated with eurozone annualised inflation coming in at a new record of 8.6%, although the core figure dipped slightly to 3.7%. ECB President Lagarde last week reiterated her preference for a 0.25% interest rate move in July, with another to follow in September. So far, the ECB is not publicly considering a 0.50% move in July.

In Asia, the Bank of Japan’s quarterly corporate survey showed a decline, and the Bank’s continued dovish monetary policy stance is likely to be tested further in the face of persistent inflation strength. We saw further evidence that China continues to recover from COVID induced lockdowns earlier this year as PMIs expanded during June. The manufacturing component was above the key 50-point level for the first time since February.