Flash on markets 26.07.22

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Flash on markets 26.07.22
By Marco Falsarella,

Key facts

- Quarterly reports from the big 5 in tech expected: Alphabet and Microsoft on July 26, Meta on 27, Apple and Amazon on 28;
- South Korea: Asia's fourth-largest economy grows 2.9% in the second quarter compared to the same period in 2021;
- Gazprom announced it will reduce gas flows through the Nord Stream 1 pipeline in Germany by 80 percent from its maximum capacity;
- Saudi Arabia: in the city of Neom, plans to build two skyscrapers with a height of 488 meters and length of 120 kilometers, capable of accommodating up to 5 million people, with a total value of $1 trillion;
- Joe Biden will virtually meet with Chey Tae, chairman of the second largest conglomerate in South Korea, SK Group, to discuss potential cooperation in manufacturing and on the supply of critical components to the U.S. market;
- China will establish a real estate fund with a potential of up to 300 billion yuan ($44.4 billion) to help various construction companies, including Evergrande, finance purchases of unfinished projects; early participants in the fund include China Construction Bank and People's Bank of China.

Germany on the brink of a recession

Following news from the Munich-based Ifo Institute on the plummeting level of business confidence in the country, with the Business Climate Index dropping to 88.6 in July, Gazprom's blocking of gas flows from Russia also adds to the situation. The reduction of supplies to a mere 20 percent of Nord Stream 1's capacity, due to an alleged technical problem, would have no basis, according to the German economy minister. In fact, extraordinary maintenance had already been carried out on the pipeline, which was back in operation on July 21 with 40 percent capacity. With the halving of flows, Germany in the first place, and cascading other European countries, seriously risk a recession already this year.


U.S. economy slowdown

The preliminary figure for the S&P Global U.S. Composite Purchasing Managers Index, which measures the combined output of the manufacturing and service sectors in the United States, fell 4.8 points to a reading of 47.5, signaling a contraction in U.S. business activity in July for the first time in more than two years. Leaving aside the pandemic, however, the data reading is the weakest it has been since 2009. A reading below 50 generally indicates a market downturn, and having a strong dollar certainly does not help support domestic demand. The recent rise in the cost of living, in parallel with the rise in interest rates and the collapse in consumer confidence is taking its toll on the real economy, causing manufacturing to stall and the post-pandemic rebound in the service sector to reverse. Currently, unemployment levels are still around 3.6 percent, but several companies may be planning further staff downsizing and reductions in overhead and other service costs in the coming months.