- There was uncertainty surrounding Russia’s failed mutiny.
- Most policymakers anticipate at least two more quarter-point rate increases by the end of the year.
- The STOXX 600 index recorded its largest weekly percentage drop in three months on Friday.
US equities closed lower on Monday due to investor caution regarding riskier assets and uncertainty surrounding Russia’s failed mutiny over the weekend. The rebellion led by Russian mercenaries raised doubts about the future of President Vladimir Putin.
While Putin expressed gratitude towards the fighters and commanders who avoided bloodshed by standing down, the US State Department stated that the situation in Russia remained unpredictable.
Last week, US equities experienced a setback following a recent rally. The tech-heavy Nasdaq, which had been on an eight-week winning streak, snapped its positive trend. This came after Federal Reserve Chair Jerome Powell hinted at possible future interest rate hikes.
This, along with the start of the final week of the second quarter ahead of the financial reporting season, led to profit-taking in growth stocks.
Among the industry sectors, the energy sector emerged as the top gainer in the benchmark index, rallying by 2.2%. The rise in oil prices contributed to this increase amid concerns about potential supply disruptions due to political instability in Russia.
This week, a series of economic data releases are expected, including an important inflation gauge, durable goods data, and the University of Michigan’s consumer sentiment index. Additionally, investors anticipate a speech by Powell that may provide insights into the Federal Reserve’s plans regarding interest rate hikes.
While most policymakers anticipate at least two more quarter-point rate increases by the year’s end, traders are betting on just one hike in July, according to CMEGroup’s Fedwatch tool.
In European markets on Monday, equities experienced a slight decline, with healthcare and defense stocks leading the downturn. The decline in defense stocks was influenced by the failed mutiny in Russia over the weekend. Russia tried restoring calm after the mutiny led by Wagner Group mercenaries. Western allies evaluated how Putin might regain control and its potential implications for the ongoing conflict in Ukraine.
STOXX 600 weekly performance (Source: Bloomberg)
The STOXX 600 index has faced pressure due to concerns over a potential economic slowdown resulting from an extended global interest rate hiking cycle. On Friday, at the end of a week marked by central bank events and weak European business growth data in June, the index recorded its largest weekly percentage drop in three months.
