Treasury Market Commentary –

Global equity markets suffer worst half year for decades

A weekly economic update from our Treasury team.

Published

15th July 2022

Category

Macro Commentary

Market turmoil continues, driven by increasing concerns over the global growth outlook and heightened recessionary fears, with ongoing supply issues exacerbating the challenges. The current weak risk sentiment continues to favour the US dollar, whilst global equity markets have had their worst half year for decades.

The Bank of England are expected to raise rates by at least 0.25% in August, with 0.50% very much on the table. Analysts are forecasting UK rates to reach a peak of 3.00% early next year, with potential rate cuts coming in late 2023 to stimulate economic growth.

In Europe, growing concerns over the gas supply is adding to an increasingly bleak outlook ahead of the ECB meeting next week, at which they have pledged to raise rates, as they move away from a negative interest rate environment. There are also concerns over further lockdowns in China which would cause even more disruption to supply and demand.

The US economy is proving more resilient, with the Fed expected to increase rates by a further 0.75% later this month, though with US inflation reaching a 40-year high of 9.1%, a hike of 1% is a growing possibility.

On the exchanges, dollar strength continues to dominate, on the interest rate differentials and its safe-haven status, with GBP/USD trading around its pre-covid lows just towards 1.1800, whilst EUR/USD has dropped to 20-year lows around the psychological 1.00 parity level, adding further to the challenges facing the European Central Bank.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

18/7/22

UK Rightmove House Prices YoY

9.7%

n/a

19/7/22

UK Average Weekly Earns. 3M/YoY

6.8%

n/a

19/7/22

UK Unemployment Rate

3.8%

n/a

20/7/22

UK CPI YoY

9.1%

n/a

20/7/22

UK RPI YoY

11.7%

n/a

21/7/22

ECB Deposit Facility Rate

-0.50%

-0.25%

22/7/22

UK Retail Sales YoY

-4.7%

n/a

22/7/22

UK S&P/CIPS Composite PMI

53.7

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.1815

USD/JPY

138.70

GBP/EUR

1.1800

AUD/USD

0.6730

EUR/USD

1.0010

USD/CHF

0.9825

GBP/AED

4.3400

XAU/USD

1704

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7039

-4.67%

S&P

3790

-20.47%

EUROSTOXX

3396

-20.98%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+2.69%

5-year

+2.40%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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