Investors continue to focus on ongoing inflation, aggressive monetary tightening, and the corresponding impact on global economic development. EU stock markets are likely to begin trading higher Friday, concluding a turbulent week positively. US equity futures also pointed to solid gains ahead of the London open, while the USD eased slightly, pushing precious metals higher.
Geopolitical issues remain
Tensions between Russia and the Western countries are rising, adding to the ruling worries. Dmitry Medvedev, Russia’s Deputy Chairman, warned that military aid to Ukraine might lead to a confrontation between Russia and NATO.
Russia has also threatened reprisal if Finland joins NATO. Finland’s president and prime minister have previously stated that the nation should apply to join NATO “immediately.”
Hawkish central banks
All the major central banks except the ECB have already raised rates and confirmed further increases are on the way. However, the US Federal Reserve is two steps ahead of other central banks, raising rates by 50 basis points in May and promising at least two or three more 50-basis-point rises in the coming months, all while drawing up measures to shrink its balance sheet.
Jerome Powell warned yesterday that keeping inflation under control might still cause economic hardship.
“So a soft landing is, is really just getting back to 2% inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now,” Powell said Thursday in an interview.
Later today, the US Michigan consumer sentiment index for May is due, seen slowing slightly to 64 from 65.2 previously. The index remains near decade-long lows as uncertainty about rising inflation, the war in Ukraine, and supply chain disruptions related to COVID-19 lockdowns in China continued to weigh on confidence.