European stocks have been on a free fall in the early morning trade on Wednesday. Financial firms from Europe say that the region is heading towards an impending recession.
Global markets come under pressure as Europe grapples with soaring inflation and a slowdown in economic growth. In the early trading hours on Wednesday, June 22, the pan-European index Stoxx fell by 1.6% or 600 points. The losses spread across all sectors with major bourses falling in the negative zone. Fears of soaring inflation and slowing economic growth have been a major concern for Europe. With these economic fears hovering over the market, European stocks have started tanking down pretty fast.
Last month in May, the UK reported four-decade high inflation at 9.1%. Rapidly soaring food and energy costs have deepened the country’s cost-of-living crisis. During the early morning European trade, oil futures declined by more than 5%.
Besides, the global benchmark Brent Crude futures also corrected 5% to $108.90 per barrel. Similarly, the US crude futures tanked 5.5% all the way to $103.50 per barrel. Welt analyst Holger Zschaepitz wrote:
“Barclays expects #recession in #Eurozone as straighter monetary policy & reduced fiscal space in high-debt countries increase risk of ‘doom loop’ as in summer of 2011: house prices could fall in countries w/overheated mkts, acc to Barclays. Fin stability risks are also a concern”.
Germany’s banking giant Berenberg sees a major recession in the US and European stocks as a base case for 2023.
Berenberg sess a recession in the US and Europe as base case for 2023. Aggressive Fed reaction to rise in US inflation to 8.6% yoy in May & new spike in gas prices in Europe have tipped the balance – fall in GDP in US & Europe has now turned from a serious risk into our base case pic.twitter.com/NBxyzizyG5
— Holger Zschaepitz (@Schuldensuehner) June 21, 2022
Interestingly, it turns out that the ECB continues to print more money despite this soaring inflation. The Welt analyst explains: “ECB balance sheet hit another ATH as Lagarde keeps printing press rumbling despite record-high #inflation. Total assets rose by €7bn to €8,827.9bn. ECB balance sheet now equal to 82.4% of #Eurozone‘s GDP vs Fed’s 36.6%, BoE’s 39.6%, BoJ’s 136.3%”.
US Stock Index Futures
After a relief rally on Tuesday, US stock futures collapsed in the early trading hours on Wednesday. In an important development, Fed Chairman Jerome Powell is to meet the US Congress to discuss the recent actions over interest rate hike and future plans to control inflation.
As per reports, US President Joe Biden has called the suspension of 18.4 percent of federal tax for every gallon of gasoline. This is to control the soaring food and energy prices in the country. Fed Chairman said that the central bank will continue to initiate further measures until inflation comes under the permissible limits.
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