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The recession that many Americans fear is coming is not “at all imminent,” Treasury Secretary Janet Yellen said. Talk of a recession has accelerated this year as inflation remains high & the Federal Reserve takes aggressive steps to counter it. On Wed, the Fed announced a 75 basis point interest rate hike, its largest since 1994. Fed Chair Jerome Powell also indicated the Federal Open Market Committee's is intent to continue its aggressive path of monetary policy tightening in order to rein in inflation. At the same time, many expect the combination of resilience in consumer spending & job growth to keep the US out of recession. “I expect the economy to slow,” Yellen said. “It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered and we have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.” Although Yellen seemed optimistic about avoiding recession, the global economy is still facing serious threats in the coming months with the continued war in Ukraine, soaring inflation and the Covid-19 pandemic. “Clearly, inflation is unacceptably high,” Yellen added. Still, she doesn't believe a drop-off in consumer spending would be the cause of a recession. Yellen said that the US labor market is the strongest of the post-war period & predicted that inflation would slow “in the months ahead.”
Germany will restart coal-fired power plants & offer incentives for companies to curb natural gas consumption, marking a new step in the economic war between Europe and Russia. Berlin unveiled the measures after Russia cut gas supplies to Europe last week, claiming technical problems caused by Western sanctions on Moscow for its attack on Ukraine. The steps, part of a broader strategy initiated after Moscow's invasion of Ukraine, aims to reduce gas consumption & divert gas deliveries to storage facilities to ensure that the country has enough gas reserves to get thru the winter. Russia's gradual cutting of gas supplies has raised the specter of a potential fuel shortage if Europe goes into winter with less-than-full stowages. It has also raised prices, putting additional pressure on economies that are already struggling with high inflation & rising borrowing costs & face the prospect of a recession. Nord Stream, the main channel for Russian fuel to Europe, has reported a sharp drop in gas supplies.
Germany to restart coal-fired plants in bid to curb Russian gas consumption
The Ukrainian negotiator leading the now-stalled talks with Russian officials called on US & NATO allies to quickly supply Kyiv with additional weapons, citing a lack of progress in brokering a peace treaty with Moscow. “Once or two times a week we call each other and they kind of check and ask what’s going on, but both sides clearly realize that right now there is no place for negotiation,” explained David Arakhamia, the majority leader of Ukraine's parliament & Kyiv's top negotiator. Arakhamia, who spoke with journalists to share updates from his discussions with Biden administration officials & lawmakers, including House Speaker Nancy Pelosi, said that Ukraine simply needs more weapons & more sanctions levied against Russia. “They stepped back and regrouped and now they’re fighting in a much different way. It’s a much smarter way I would say because the logistics are in place now,” Arakhamia added. In the weeks following the Kremlin's late-Feb invasion of Ukraine, Russian forces on the ground were beset with a slew of logistical problems on the battlefield, including reports of fuel & food shortages. Arakhamia added that Ukraine's fight against Russia has shifted to a “distance fight” & will therefore require a consistent supply of long-range artillery, drones, jammers & radars in order to counter Russia's colossal arsenal of medium-range ballistic missiles & long-range rockets. “There is no single region in Ukraine which is considered totally safe because they have missiles with the distance that allows them to shoot any target within the whole Ukraine,” Arakhamia continued.
‘The world was not ready for a fight of this scale,’ Ukraine’s top negotiator says
The pan-European Stoxx 600 gained 0.7% after an uncertain start, with construction & material stocks shedding 2% while banks added 2.5%. The cautiously positive trade for Europe today came after a turbulent week of trading on the back of a flurry central bank action. The Federal Reserve raised its benchmark funds rate by 75 basis points, its largest hike since 1994, before the Swiss National Bank surprised markets with its first hike since 2007 & the Bank of England implemented its 5th rate rise in a row. Following an emergency meeting last Wed, the ECB also announced that it plans to create a new tool to tackle the risk of euro zone fragmentation, a move aimed at assuaging fears of a fresh debt crisis for the common currency bloc. French markets nudged higher but lagged other major European bourses after Pres Emmanuel Macron lost his absolute majority in the country's parliamentary election, potentially jeopardizing his economic agenda.
European markets nudge higher as investors reflect on economic uncertainty; Renault up 7%
Oil prices edged down today, reversing earlier gains, as concerns about slowing global economic growth & fuel demand offset worries about tightening supplies. Brent crude futures slipped 8¢ to $113.04 a barrel, after rising as much as 1% earlier. Front-month prices tumbled 7.3% last week, its first weekly fall in 5. US West Texas Intermediate crude was at $109.49 a barrel, down 7¢, after rising more than $1 earlier. Front-month prices dropped 9.2% last week, the first decline in 8 weeks. US oil & gas production is climbing. The oil & gas rig count, an early indicator of future output, rose by 7 to 740 in the week to Jun 17, its highest since Mar 2020, energy services firm Baker Hughes said on Fri. In Libya, oil production remained volatile following blockades by groups in the country' east.
Oil wobbles as global economic worries offset tightening supply
Gold extended losses today as an elevated $ weighed on bullion demand, with a US market holiday expected to lead to thin trading during the day. Spot gold was down 0.2% at $1836 per ounce & US gold futures were flat at $1840..The $ index hovered near its highest level in about 2 decades, making greenback-priced bullion less attractive for overseas buyers.
Gold prices inch lower as firm dollar dents appeal
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