European equity close: Italy leads the freefall

Europe is getting hammered by inflation worries, rate hikes and the potential for a sovereign debt crisis, which is why Italy underperformed today.

  • Stoxx 600 -2.7%
  • UK FTSE 100 -2.1%
  • German DAX -3.1%
  • French CAC -2.8%
  • Italy MIB -5.0%
  • Spain IBEX -3.8%

European stocks had held up much better than US stocks since the March low, in part because of far less tech exposure and lower multiples. But then you get a day like today where Italian stocks cut through support in a 5% fall and it’s a reminder of the risks.Italy MIB

Japan top currency diplomat says authorities will take appropriate action if needed

  • Cannot disclose what was discussed
  • But we will take appropriate action if needed
  • There are various options in mind

That’s a more stern footing by Japanese officials but I would argue that it is all still part of their verbal intervention playbook. The overall remarks are still more or less the same as when we saw USD/JPY broke above 120 and that shows the lack of alternatives in their toolkit. Any serious intervention in the market is still a bit of a reach if you ask me.

Reuters poll on Federal Reserve expectations: 50bps in June and July with more to follow

Reuters poll report holds no surprises:

  • The U.S. Federal Reserve will hike its key interest rate by 50 basis points in June and July, with rising chances of a similar move in September, according to a Reuters poll of economists who see no pause in rate rises until next year.

Basically unanimous:

  • All 85 economists in a June 6-9 Reuters poll predicted a 50 basis point federal funds rate hike to 1.25%-1.50% on Wednesday, after a similar move last month. Another such hike was penciled in for July by all but a handful of survey contributors.

More here at the Reuters report if this is of any interest or news to anyone.

FOMC dates ahead this year:

fomc 2022 meeting June to December

Finnish President, Sweden’s King swiftly leave Baltic Sea island as Russian navy approach

Via UK media:

  • President of Finland and his wife abruptly flew out off the Baltic island chain
  • Strategic Åland islands are a demilitarised and vulnerable region of Finland
  • Hours before Putin had issued veiled threat about retaking Russian lands
  • Russian navy had been spotted in the Baltic near the undefended islands
  • The Baltic has been very tense since Finland and Sweden applied to join NATO


  • innish President Sauli Niinistö and wife Jenni Haukio… had been due to have dinner with Sweden’s King Carl Gustav XVI and Queen Silvia but that was cancelled.
  • Sweden’s royal pair stayed on and attended the opening of an evening concert but left part-way through


  • Local news sites reported Russian frigates had begun a drill in the Baltic Sea off the enclave of Kaliningrad. Nato are also conducting exercises in the region.

Link here for more.

There is not much margin for error in this ongoing tension.

sweden finland russia nato 10 June 2022

OIl – France, Britain & Germany say they condemn Iran’s actions in response to a IAEA

France, Britain and Germany:

  • condemn Iran’s actions in response to an IAEA board resolution, they say Iran aggravates the situation and complicate efforts to return to the nuclear deal
  • Iran’s actions exacerbate the situation and complicate efforts to restore full implementation of the 2015 nuclear deal.
  • Iran’s actions cast further doubt on its commitment to a successful nuclear deal outcome.

Background is that IAEA Director Grossi said Iran told IAEA it plans to disconnect 27 IAEA cameras as of today. Grossi says not restoring monitoring in the next 3 or 4 weeks could be fatal for the Iran nuclear deal.

iran eu us 08 May 2022

Yellen says inflation is clearly a major problem, it’s what I’m most focused on

  • I don’t think we’re going to have a recession, there is nothing to suggest a recession is coming
  • says she believes there is a path through this to a soft landing
  • oil prices could go higher
  • there’s recession risk of course, I don’t think that it’s the most likely outcome

  • See risks of higher energy and food prices

This from Wednesday US time along the same lines:

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