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Wall Street is ready for a setback, but recession risk keeps investors cautious

LONDON, June 21 (Reuters) – Wall Street was set to open higher on Tuesday and European equities were set for a second day of recovery, recovering slightly from last week’s 17-month low, but major central bank plans for rate hikes and Global recession risk kept investors cautious.

World equities have risen so far this week, recovering from last week̵[ads1]7;s strong sales, which caused global equities to fall to a low since November 2020, as expectations of a tightening of central bank policy to combat high inflation led investors to drop risky assets.

At 1110 GMT on Monday, the MSCI World Equities Index, which tracks equities in 50 countries, was up 0.4% on the day (.MIWD00000PUS).

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Europe’s STOXX 600 was up 0.8% (.STOXX) and London’s FTSE 100 was up 0.7% (.FTSE).

US markets, which closed on Monday due to a public holiday, were set to open higher, with the S&P 500 e-minis and Nasdaq futures both up 1.7%.

Analysts still expect the return to be short-lived. Timothy Graf, head of macro strategy for EMEA at State Street Global Markets, said the rise was likely a result of markets being oversold in recent weeks and relief that event risks, such as the Bank of Japan and Swiss National Bank meetings, have passed. .

“I think there is a break in what is still a trend where you have this increasing likelihood of slowing growth, high inflation – stagflation potential – outcome,” he said.

“I don’t think the stock markets and the earnings prospects for companies have completely taken over.”

Goldman Sachs said it now believes there is a 30% chance that the US economy will tip into a recession within the next year, up from the previous forecast of 15%. read more

Germany’s BDI industry association cut its economic forecast for 2022 and said that a halt in Russian gas supplies would make the recession in Germany inevitable. read more

Earlier in the session, Reserve Bank of Australia Governor Philip Lowe signaled several rate hikes, saying inflation was expected to reach 7% by the end of the year. read more

European bond yields rose, with the German reference yield of 10 years up 12 basis points on the day to 1.78%.

In the foreign exchange markets, the euro was up 0.4% to 1.05515 dollars, while the US dollar index was down 0.2% on the day at 104.07.

The US 10-year interest rate was 3.2844%, down from last week’s peak of 3.495% – the highest since 2011 – which came on the same day as the Fed raised the interest rate by as much as 75 basis points.

The Japanese yen, which has fallen sharply in recent months, fell further to $ 135.97 – the weakest yen since 1998.

Japanese Prime Minister Fumio Kishida said the central bank should maintain its current ultra-loose monetary policy. This makes it an outsider among other major central banks. read more

Oil prices rose as investors focused on tight supplies of crude oil and fuel products. Brent oil futures were up 1.1% to $ 115.38 while US West Texas Intermediate (WTI) oil futures were up 1.4% to $ 111.13. read more

Gold was little changed to around $ 1,832.6 per ounce.

Bitcoin was up around 3% on the day to $ 21,173, after stabilizing slightly since it plunged to as low as $ 17,592.78 over the weekend. Cryptocurrencies have increasingly become a metric for risk appetite, the State Streets Graph said.

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Reporting by Elizabeth Howcroft; Editing Louise Heavens and Chizu Nomiyama

Our standards: Thomson Reuters Trust Principles.

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