Markets Start Under Pressure As China Retail-Sales Miss Adds to Recession Fears

Equities markets sink as China data raises recession fears. In FX, JPY rallies on safe-haven inflows. USD lightly bid. News of Sweden & Finland NATO bids creates uncertainty amidst Russian threats. Commodities fall as USD holds near multi-year highs.

Key Factors for Today

• USD lightly bid on Monday 

• Risk assets under pressure following weak China data

• News of Sweden & Finland NATO membership creates uncertainty

• JPY leading FX markets via strong safe-haven demand

• Gold, silver & oil all lower across European open 

Coming Up

• EUR EU economic forecasts
• USD Empire State manufacturing index
• GBP Monetary policy report hearings 

US Dollar Ends the Week at Highs

The US Dollar starts the week lightly bid across the European open though the Dollar index is slightly off last week’s highs for now. Friday’s UoM consumer sentiment index was seen plunging to its lowest level in 13 years, highlighting the growing economic crisis facing consumers as prices and rates rise simultaneously. Tuesday’s retail sales print is expected to further reflect a deterioration in conditions, with USD likely to retain safe-haven demand consequently. 

Equities Fall Back Following China Data Flop 

A heavy start to the week for equities prices with the FTSE down almost 1% on the day, retracing the gains made on Friday. DAX expected to follow suit at the top of the hour. Meanwhile, US and Asian equities start the week under pressure also following weaker-than-expected China data overnight. Retail sales were seen cratering to -11.1% on the month in the latest evidence of a slowdown there. Growing fears over a budding global recession are likely to keep risk assets weighed down in the short-term. 

Sweden & Finland NATO Bids Add to Uncertainty 

News of Sweden and Finland’s plans to apply for NATO membership is also creating uncertainty among investors on Monday. With Russia having threatened retaliation against any such move there is a fear of violence in the region escalating. There have been reported that Russia has already switched off gas supplies to Finland as of Friday in a first sign of Russian counteraction. 

JPY Rises Again on Safe-Haven Demand 

In FX, JPY leads the way (trailed by USD) across late Asian and early European action as safe-haven flows continue to lend support. For now, it seems markets are happy to shrug off the BOJ’s uber-easing stance as global equities prices recoil. Once again, t’s the antipodeans (AUD & NZD) which find themselves under offer as we start the new week. Risk aversion has been a major headwind to these currencies recently and looks set to remain that way in coming sessions. 

Gold & Silver Turn Lower 

Gold and silver have been well sold by European traders on Monday. Ongoing strength in the US Dollar is seeing gold prices turn back towards last week’s lows with the metal having fallen almost 6% over May alone.  Silver prices are down by around 12% at their lowest on month though are sitting slightly up from that level currently following a late bounce last week. 

Oil Prices Soften, Germany Threatens Full Russian Oil Ban by Year-End

Oil prices have started the week under pressure with crude futures down around 1.5% in early Europe. However, on the back of last week’s recovery rally, the market is sitting above the 108.94 level signalling the prospect of further higher prices this week. News that Germany plans to push ahead with a full ban on Russian oil by year end, even if not agreed upon EU wide, is likely to keep the focus on supply-tightness in the short term.