The first week of July saw a slight recovery in stocks after a tumultuous first half. However, there were fewer price-fixing reports. Investors are still asking, is the potential for a recession already baked into asset prices? Should we fear further sharp declines, or is the worst already behind us? These are the questions on the minds of bulls and bears across investments. The truth is probably somewhere in the middle. The fact is that we have entered a historically seasonally better period for stocks.
The US Federal Reserve has published the minutes of its latest meeting. Fed officials stressed in June the need to fight inflation, even if that means slowing an economy that already appears to be on the brink of recession. Fed members said another move of 50 or 75 basis points beyond the 75 basis point increase approved in June was also likely at the July meeting.
In discussing possible policy measures at upcoming meetings, participants continued to assume that continued rate increases would be appropriate to achieve the goals. This is negative news for the euro, which continues to regularly weaken against the dollar and move towards parity. The euro is thus at its lowest level against the dollar since 2023. The US economy shrank by 1.6 percent in the first quarter and will contract by 2.1 percent in the second quarter, according to data tracked by the Atlanta Fed. This would put the economy into a technical, albeit historically shallow, recession.
Recession awaits you all, Nomura tells the world’s major economies
In recent weeks, the word recession has become inflected as often as inflation or, earlier, covid. No wonder many countries fear it. And apparently they have a reason – according to an analysis by the Japanese bank Nomura, most of the world’s major economies, including those of Europe, America, Japan and South Korea, are expected to fall into recession in the next twelve months, CNBC reported.
Europe in captivity of green dreams
The ECB is considering adjusting its portfolio of corporate bonds, the value of which is over 340 billion euros. As part of the changes, much more emphasis will be placed on investments in bonds issued by companies focused on ecology. This is a definite step towards the fight against global warming. The matter does not conform to the standard rules of monetary policy. The bank has not yet told the markets how it wants to fight the differential yields on the bonds of the southern wing of the monetary union.
Fears of a eurozone recession are growing as industry and households remain under pressure from electricity and gas prices. The numbers are getting more and more ominous. The Russian Federation, through Gazprom, continues to reduce gas supplies to Europe. They are already almost a quarter of the level in March. In Germany, it screws up the price of electricity for 2023 to 420 euros per megawatt hour (MWh), the gas contract in December is then at the level of 170 euros/MWh.
ECB: European banks are at risk of billions in losses. Due to the effects of climate change
A sudden jump in the price of emission allowances, combined with floods and drought, will cause losses of at least 70 billion euros (1.7 trillion crowns) to the largest banks from the eurozone. This was stated by the European Central Bank (ECB) in its first major climate stress test. The findings do not affect the amount of capital that banks must have this year.
The energy market is collapsing
The German government will have to to save Uniper, which is under pressure from a drop in gas supplies, the purchase of the company’s shares could reach the level of five billion euros. In France, the situation is not better, but rather worse. And they are a bit better off in terms of energy mix. The common electricity market in Europe is therefore gradually collapsing more and more. In response to the situation, France proposed buyout of the remaining EDF energy shares. The company is not in the best shape, delays in the preparation of new reactors and the capping of electricity prices are taking their toll. The company’s debt will grow to over 61 billion euros. President Macron hinted at the possibility of nationalization a few months ago. According to the research think-tank Oxford Economics, it is quite realistic that gas rationing will occur this winter. The matter should also concern the Czech Republic.
Stanislav Šulc: ČEZ has returned to Varu. In a different role than everyone would like
Current events surrounding ČEZ become the main topic of conversation in the business part of the Karlovy Vary festival. Often the debates are more reminiscent of the debates of conspiracy theorists than active investors.
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