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Below is Daily Global Market Update 24 June 2022 By Asheesh Chanda, Kristal.AI

“Equities and treasuries rallied yesterday as investors are rethinking the path of inflation and rate hikes. Stocks swooned midday but rallied back to close near the highs for the day. S&P 500 was up close to 1% on the day and Nasdaq climbed 1.5% to close slightly below 3800 and 11700 respectively. 7/11 sectors closed green, with utilities leading (+2.34%) and energy falling (-3.77%).

Slowing economic growth expectations are weighing on energy stocks and commodities as both have continued to drop in the last few days. The $100 support has held well for WTI Crude till now though. BCOM Index (Bloomberg commodity spot index) has retreated to its lowest level since February 2022. The big question for investors is that will this turn out to be a buyable dip in the long term structural rally in commodities that we have seen till now or is there more pain to come in this sector given slowing demand is now becoming one of the important market narratives.

Copper is also having a torrid month so far as it has dropped more than 12% till now and is trading at one year lows and breaking technical support levels to the downside.

Growth in US private-sector activity slowed significantly in June and came in at a flash estimate of 51.2 (a five-month low) after 53.6 for May. This is the second weakest growth in activity since July 2020, with weaker service sector output growth now being accompanied by the first contraction in manufacturing output in two years. Investors have started to evaluate economic threats and scaling back expectations for inflation and interest-rate hikes it seems. The policy sensitive US treasury 2 year yield is on course for one of its biggest weekly drops since March 2020.

Growth data from Europe was even worse as manufacturing data indicated a sharp deceleration in June. PMIs data showed manufacturing output in Germany and France fell more than expected. Surging concerns on the economic outlook and soaring interest rates are causing a halt in the momentum. The STOXX50 fell more than 1% while German bonds rallied in reaction to worse than expected data thus exacerbating recession fears.

In other news, yesterday we learned that the thirty-three largest banks in the US have passed the Federal Reserve’s annual stress test. The annual stress test scenario included a 40% decline in commercial real estate prices, a 55% drop in stock prices, higher stress in the corporate debt market, and a 10% unemployment rate. These results endorse the strength of the U.S. banking system and couldn’t have come at a more opportune time as economy seems to be grappling with the double whammy of rising inflation and slowing growth. Bank stocks were largely unchanged on the news suggesting that these results were already expected.

Equity futures this morning are up and are on the right track to close the week on a positive note.

Today we have the US University of Michigan consumer sentiment that will be closely watched by the investors.

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