Please see the daily investment notes for Friday 23rd of June.

S&P 500 went up by 0.3%, and Nasdaq increased by close to 1% last night, propelled by Tech, Consumer Discretionary, and Communication Services. However, developed market stocks have lost 1.1% over the previous five trading days, while Emerging Market stocks are down 2.7%. Unless something positive happens today, this would be the worst week for equities since March.

The hawkish central bank hyperbole doesn’t help. BoE increased the policy rates by 50 bps to 5% in order to fight red-hot inflation figures. Apart from BoE, SNB and the central bank of Norway also hiked policy rates. Germany’s yield curve inverted the most since 1992 on mounting unease over the growth outlook. Ten-year bund yields fell 74 bps below the two-year rate. In his testimony, Chairman Powell added that regulators may ask banks to set aside an additional 20% as they increase capital requirements. The changes would focus on lenders with assets over $100 billion. This is negative for the banking sector stocks.

In emerging markets, Indonesia and the Philippines maintained their rates following similar decisions by Brazil and Egypt a day earlier. Turkey did change its course by hiking policy rates to 15%. But the magnitude of the hike of 650 bps was lower than the Bloomberg consensus of an 1150 bps increase and disappointed markets. This led to a fall in the Turkish Lira and an increase in the 5-year CDS sovereign spreads.

The Conference Board leading index fell 0.7%, less than forecast. The amount of distressed US commercial property assets rose 10% in the first three months of the year to nearly $64 billion, according to an MSCI Real Assets report. Jobless Claims increased to 264k, higher than expected.

Asian Shares this morning reflect the mood of the investors, with stock indices in the red from Australia to Japan. Japanese equities fell 1.5%, reversing the earlier trend. The worst losses were in the Hong Kong stocks that were playing catch up with the rest of the world. US equity futures are trading down as well. 2-year Treasury yields increased to 4.78%, slightly above the Dot Plot estimates of a 4.6% rate by the end of 2024, post-Chairman Powell’s repeated confirmation of more rate hikes to come. Stronger than expected inflation, with CPI excluding fresh foods at 3.2% in Japan, sparked suggestions that the Bank of Japan may adjust its price forecasts or tweak its ultra-loose monetary policy. Higher for longer interest rate expectations have affected commodities as well. Oil slumped by 4% yesterday as Brent Crude traded around $73. Gold trading at $1,910.