Today the economic calendar is extremely scarce. Australia published its preliminary retail sales report for May, which was lower than expected. Furthermore, later in the day there will be speeches by the European Central Bank and the Federal Reserve, but nothing major is expected to come out of those.
The stock markets are expected to fare better today after the nightmarish week they just had. Due to the Federal Reserve’s announcement last week of potential rate hikes as early as 2023 (even 2022, according to one board member) instead of 2024 like planned, stocks plummeted on Wednesday.
All major US indices are likely going to recover some of their lost ground today as investors adapt to the new market situation. In addition, many reports point to mergers and acquisitions being at an all-time high in both the United States and Europe at the moment, with a particular focus on companies in the EU and the United Kingdom right now.
In the wake of the Fed’s announcement, bond yields worldwide have taken a hit. Those types of assets have been increasing in 2021 due to rising inflation rates, but with interest rate hikes in sight, they are now retreating.
France is the only exception when it comes to bond yields at the moment. The country just had a round of regional elections, where the far-right eurosceptic party of Marine le Pen did not do as well as it had hoped, an indication that there might be more political stability in France than feared. This in turn has boosted French bond yields.
Cryptocurrencies are another asset class to take a hit today. China, which has taken a hard stance on cryptocurrencies for months now, officially took measures to close down the Bitcoin mining farms in Sichuan. Additionally, more Chinese banks have come forward announcing they will not support any cryptocurrency transactions.
As a result, Bitcoin has retreated to the $33,000 level and the trend indicates its value might drop below 30K soon. Other cryptocurrencies are not quite as volatile but the trend tends to carry over the entire asset class, so we expect losses all-around.
Meanwhile, oil prices are on the rise due to doubts over Iran’s ability to sign a new nuclear deal with the United States and other western countries. There were presidential elections in Iran over the weekend, with conservative Ebrahim Raisi ultimately securing the win. The United States has sanctions in place against Raisi for human rights violations, which means it will most probably be unwilling to negotiate a new deal with him, especially because Iran will want those particular sanctions lifted.
As a result, the Brent crude climbed to $73.94, while the WTI reached $71.72.
