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Market Outlook: Record-high euro area inflation

  • Consumer prices climb 8.1% in the euro area
  • EU leaders agree on sixth package of sanctions
  • US to publish monthly labour market statistics

After a strong closing last week, Sweden’s OMXSPI all-share equity index was up by 2.9% between May 20 and May 27. Yet this upturn pales in comparison to America’s broad S&P 500 index, which ended the week nearly 6.6% higher after seven disappointing weeks. One contributing factor may have been the US government bond market, where 10-year Treasury yields slid from 2.97% in mid-May to below 2.72% on May 27. By May 31 yields were back above 2.85%.


Consumer prices climb 8.1% in the euro area

On May 31 (yesterday) Eurostat published flash inflation figures for the 19-country euro area, showing that the Harmonised Index of Consumer Prices (HICP) has climbed by 8.1% year-on-year in May, up from an inflation rate of 7.4% in April. The main reason for the increase is the impact of the Ukraine war on energy and food prices. The European Central Bank (ECB) is expected to begin tightening euro area monetary policy by hiking key interest rates starting this summer.

EU leaders agree on sixth package of sanctions

After a lengthy summit in Brussels, late on May 30 leaders of the 27-country European Union reached an agreement to stop importing most Russian oil. As a result, international oil prices climbed. Brent crude was trading at somewhat above USD 120/barrel early on May 31. Aside from banning Russian oil imports by sea, the sixth sanctions package includes asset freezes and travel bans on individuals close to the Kremlin. It also removes Russia’s biggest bank, Sberbank, from the global financial transfer system SWIFT.

The United States

US to publish monthly labour market statistics

On Friday, June 3, the Bureau of Labor Statistics will publish employment figures for May. In April, US unemployment was 3.6%. Forecasters expect employment to continue increasing at a steady if slowing pace, but we believe that the risks compared to this consensus are larger on the downside.

More muted forecasts

New Investment Outlook!

High inflation, central banks that must quickly raise key interest rates, COVID-19 lockdowns in China, the war in Ukraine and much lower economic growth expectations have plagued financial markets during 2022. Risk appetite has fallen as problems have mounted. We expect stabilisation soon, but the risk situation remains troublesome.

Last week we published the latest issue of our quarterly Investment Outlook report, where you can read about our forecasts for equities, fixed income investments and other asset classes and read in-depth articles about interesting themes and trends. You will find links to the report, summaries and a video below.

Download the full report only (pdf)

Download the related material