Markets Remain Volatile on Friday, Await US Data

China’s economy saw a severe contraction in the second quarter, with GDP declining by 2.6% from the prior quarter, as opposed to the prior quarter’s revised 1.4% growth. This emphasized the negative effects of widespread COVID lockdowns on activity in the second-largest economy in the world and cast doubt on the progress of the global recovery.

Governor of the Federal Reserve Christopher Waller stated that markets may have anticipated too much when pricing a 100 bps rate increase for July and that a 75 bps increase will get them to neutral. A 75 basis point rate rise in July has a 52 percent possibility, according to CME FedWatch

Additionally, the European Commission stated in the publication of its summer economic projections that it now anticipated inflation to rise to 7.6% in the eurozone, up from 6.1% and 8.3% in the larger bloc this year, before falling to 4.0% in the eurozone and 4.6% in the EU in 2023.

Inflation was predicted to reach its peak in 2023 at 3.2% for the EU as a whole and 2.3% in the nations using the single currency. This once again proved how incompetent the policymakers are.

Moreover, the US PPI increased by 11.3% year over year in June, much above the +10.8% forecast. 

The monthly change came out at 1.1%, above 0.9% expected. This is the 27th straight month of monthly increases in producer prices.

The core inflation slipped from 8.5% to 8.2% yearly, exceeding the 8.1% expected.

Later today, the most recent retail sales data from the US Census Bureau is due. In contrast to the 0.3% fall seen in May, analysts predict a 0.8% monthly gain in retail sales in June. Moreover, the most recent reading can offer insightful information on consumer confidence in the face of persistently rising inflation.

Last but not least, the preliminary reading of the University of Michigan’s Consumer Sentiment Index (MCSI) is due on Friday, expected to improve from 50 to 58.