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21.06.2022 07:34 PM
Stock market recovers

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US equities rebounded at the opening of trade on Tuesday after last week's rout erased nearly US$2 trillion from the S&P 500.

The S&P 500 added 2.6%, led by energy and technology shares, while the Nasdaq 100 rose 3.2% following the long weekend. The fall in Treasuries resulted in the 10-year bond yield dropping to 3.3%.

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Sentiment this week is being helped by comments from President Joe Biden that a US recession is not "inevitable", but the outlook remains parlous for investors weighing whether the market has bottomed. Bear markets usually take time to find a bottom, especially when they are accompanied by a recession, as happened in 2008's financial crisis

European stocks advanced for a second day, with carmakers leading the gains in the underlying Stoxx 600 index.

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After unexpectedly, US consumer price growth is seen slowing, with a Bloomberg survey of economists predicting 6.5% by the fourth quarter and to 3.5% by the middle of next year.

However, there are growing fears that Federal Reserve policymakers intent on easing price pressures will go too far and trigger an economic slowdown. Strategists at Morgan Stanley and Goldman Sachs Group Inc warned that equities may have further to fall to fully price in the risk of recession, reflecting wider skepticism about Tuesday's rebound.

"Investors are increasingly worried that sticky high inflation and a Fed that is clearly committed to reducing price pressures will result in a recession," Dennis DeBusschere, founder of 22V Research, said in a note. "The bear market will end when the inflation/recession outlook becomes clear. Until then, bear market rallies and declines will remain the norm."

What to watch this week:

• Fed chair Jerome Powell semi-annual Senate testimony, Wednesday• Bank of Japan April minutes, Wednesday• Powell US House testimony, Thursday• US initial jobless claims, Thursday• PMIs for eurozone, France, Germany, UK, Australia, Thursday• ECB economic bulletin, Thursday• US University of Michigan consumer sentiment, Friday• RBA's Lowe speaks on panel, Friday

Andrey Shevchenko,
Analytical expert of InstaForex
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