Bearly Standing

Bearly Standing

Yesterday marked a grey end of H1 2022 for US equities, having witnessed their worst six months since the 1970s. This comes as the S&P 500 fell 0.9% yesterday, meaning that the index fell 20.6% over the half year period while the S&P 1500 index has lost some $9tn in market value. Similarly, the Dow Jones has slumped 15% - representing the biggest half year drop since 1962. Nevertheless, it has been the tech-heavy Nasdaq Composite which has suffered the worst losses with the index slumping close to 30% after a 1.3% fall on Thursday. With consumer confidence and disposable income falling while interest rates and inflation continue to rise Citi bank recently lowered its year-end forecast for the S&P 500 from 4,700pts to 4,200pts.

While stocks across the board have fallen, share prices of energy companies have rocketed an average of 29% since the start of the year as the price of oil and gas has risen exponentially, exacerbated by the implications of the conflict in Ukraine.??????

Losses in the US equities market is indicative of those across all corners of the globe. For example, in the UK the FTSE 250 dropped 20% while over in the Asia-Pacific region, the MSCI index slid 18%. Share prices also fell on the continent with Europe's Stoxx 600 index dropping around 17%. This means that European equities have had their most challenging quarter since the start of the pandemic and this morning’s start to Q3 has already seen the Stoxx 600 lose 0.8% of its value.???

UK Trade Suffers

The UK’s trade performance has slumped to its lowest level since records began in 1955 as the current account deficit rose to 8.3% of GDP. This is a seismic shift from the average quarterly level of 2.6% witnessed across 2021 and underscores the challenges faced within the UK export market. The FT highlighted that this data involves a 4.4% decline in real exports and a 10.4% rise in real imports, in addition to the deficits recorded in investment income.

With uncertainty remaining around the UK’s future trading relationship with partners, many economists are forecasting that the current account deficit could continue to rise, with lower investment into the UK being a particularly salient issue.????

Oil Set for Third Consecutive Weekly Decline

WTI crude futures are heading for their third consecutive weekly decline as investors weigh on the prospect of lower demand through dampening growth and recessions. Prices have slidden to around $105.5 during this morning’s session in spite of OPEC+ unwillingness to commit to further raising output during yesterday’s meeting. This means that they will stay in line with their existing strategy of increasing production by 648,000 barrels per day in July and August. Later this month, President Biden will fly to the Middle East in an attempt to get members of OPEC to raise exports to the US, thus reducing inflationary pressures at American pumps

No.10 Considering VAT Cut

The Times are reporting that No.10 are considering a potential cut in VAT to reduce the impact of the cost-of-living crisis. Over the course of FY 2021/22, Value Added Tax receipts accounted for around ￡157.3 billion tax receipts, and thus any proposals for a reduction would produce further friction between No.10 and No.11. Of course, shortly before Boris Johnson’s No-confidence Vote, the PM attempted to assuage Tory backbenchers by suggesting that they would reduce the tax burden on households. Of course, such a policy would need to be sufficiently monitored to ensure that any tax cuts are appropriately passed on to households. Just earlier in the year, government announced a five pence reduction in fuel duty, however recently the Competition and Markets Authority (CMA) stated that it found sufficient evidence that this cut had not been passed on to consumers.??