- European Earnings Season Continues to Surprise.
- Historic European Drought Threatens Trade.
- Federal Reserve Members[1] Reiterate the Need for Further Rate Hikes.
Understanding Inflation & its Global Impact[2]
DAX 40: Trims Gains as Risk-On Mood Fades, Technical Roadblocks in Play
The DAX[3] rallied higher in early European trade before trimming gains as we approach the US Market Open. The rally, boosted by softer US CPI numbers[4] yesterday, saw markets enter a risk-on mood that continued into the European open. Investors are now pricing in a 50 basis point hike by the US Federal Reserve in September, down from earlier expectations of a 75 basis point increase. Market sentiment was tempered by Federal Reserve[5] members who were quick to stress that price pressure remains intense necessitating the need for further rate hikes. Minneapolis Fed President Neel Kashkari said he wants the Fed’s benchmark interest rate at 3.9% by the end of this year and at 4.4% by the end of 2023. Chicago counterpart Charles Evans stated that the Fed would be increasing rates for the rest of this year and into 2023. As these comments hit the wire there was a notable shift in sentiment as markets may have been premature in ruling out a further 75 basis point hike in September.
Adding further challenges to the German economy reeling from recession fears, the recent heatwave across the continent means its rivers are evaporating. The Rhine River, a pillar of the German, Dutch and Swiss economies for centuries is set to become virtually impassable at a key point later this week, stymieing vast flows of diesel and coal. The Rhine, whose nautical bottleneck at Kaub is expected to dip below the mark of 40 centimeters early Friday and keep
