EU retail sales, Fed minutes and US PMIs are closely watched

On Wednesday, the market will try to find bargains again, hoping to reverse the downward trend. However, most eyes will be on the Eurozone retail sales data for May, which will give an indication of how rampant inflation is affecting consumers in the Eurozone. 

Events of today

In addition, the minutes from the last Federal Reserve meeting will be released, which resulted in the highest interest rate increase since 1994 of 75 basis points. There will also be a substantial impact on the US economy based on the ISM Service PMI data, which is also due on Wednesday. According to market consensus, economic data is expected to decline from the previous release of 55.9 to 54.5. Investors will eagerly watch the latest job opening report. JOLTs report is likely to fall to 11M in May from 11.4M.

FX market

The yield on the two-year Treasury note has dropped below the yield on the 10-year overnight, a reliable market indicator of a recession causing growth to slow. In response, the dollar has ruled, and the beaten-down Japanese yen has regained a safety bid. As a result of a tumbling euro, the US dollar index hit a 20-year high of 106.79 on Wednesday.

Euro traders expect a slight respite on Wednesday after the currency dropped as far as $1.0236 yesterday. In the event that Eurozone retail sales figures reported later today disappoint expectations for a 0.4% rise in May, selling could follow.

Equity markets

Following hefty losses on Tuesday, the main equity indices capped part of their losses on Wednesday. According to fresh survey data, the Eurozone's economy appears to be heading toward contraction. It followed the S&P Global's composite purchasing managers index for the single currency bloc, which registered its lowest reading in 16 months. Sellers appear to take a breather Wednesday after the DAX, and FTSE 100 fell 2.9% on Tuesday.

Market's uncertainties 

European gas rationing talks, a political crisis in Britain, and a fresh flare-up of COVID-19 cases in Shanghai contributed to the negative sentiment. The latest round of worries stems from uncertainty over Europe's gas supply, which has sent gas prices soaring against slumps in other commodities on concerns about energy shortages in the coming winter.

Investors are concerned that the Nord Stream pipeline, which transports gas from Russia to Germany, might not resume flow after a ten-day maintenance shutdown from July 11, leading to rationing and a sharp drop in economic activities.