Week ending 1st July 2022.

It was a mixed bag for markets this week, as end of the week losses erased early week gains. Despite a volatile week for many key markets, the S&P 500 ended the week by closing 1% up on the day.

The President of the European Central Bank (ECB), Christine Lagarde, laid out the central bank’s plans for a 0.25% rate hike in July, setting market expectations.

Towards the end of the week, Eurozone inflation was released at 8.6%, driven by food and energy costs. Alongside the release of CPI (the measure that dominates the headlines), you can find core CPI – a measure of inflation which excludes food, alcohol, tobacco and energy. This reading came in below expectations and below last month, at 3.7%.

Given that this is a measure that isn’t targeted by the ECB when assessing monetary policy, markets often don’t pay much attention to it. However, it still tells us some vital information. The decrease in the reading is a sign that some of the pressures that have built up behind inflation are beginning to ease.

The Eurozone manufacturing PMI was also released, inching above last month’s figure, both above expectations and into expansionary territory at 52.1.

Elsewhere, following the increase in natural gas prices due to reduced Russian gas supply through Nord Steam 1 (and the inability to pass these costs onto consumers), German energy company Uniper announced it is in discussions with German officials to be bailed out. The energy giant, based in Germany, has operations in the UK, including Connah’s Quay Power Station and Ratcliffe-on-Soar coal Power Station. We need to remember, Germany typically consumes almost half of its gas supply from Russia, making the country one of the most reliant anywhere else in the developed western world. The country has previously announced that it is set to utilise idled coal-fired power stations to deal with energy requirements in the short-term.

Next week, we have the minutes of the last US Fed policy meeting. We know they raised rates by 0.75% at this meeting, but the minutes will give us an insight into their thoughts.

Other data to look out for includes Eurozone retail sales, US, UK and Eurozone services PMI, US employment data and Chinese CPI.

Hannah Owen, Portfolio Specialist.