Europe: The National Bank of Kuwait noted that applications for US unemployment benefits rose for the third week, hitting their highest level since last November, as more companies announced layoffs.
In its weekly report on the money markets, the NBK stated that applications submitted for the first time to obtain government benefits rose by 7,000 requests to reach 251,000 during the week ending on July 16, and at the same time, continuous claims for unemployment benefits increased by about 51,000 requests. To 1.38 million during the week ending July 9, marking the largest weekly increase since November.
The report indicated that in light of the growing fears of a recession, applications for unemployment benefits might continue to increase, especially after the Federal Reserve raised the interest rate several times to the highest levels in decades, which may reduce job applications, but the unemployment rate remained at the level of 3.6 percent. The fourth consecutive month is in line with the lowest levels recorded in 50 years, which we last saw before the pandemic in 2020.
Interest in Europe
In Europe, the report indicated that the European Central Bank raised last week the key interest rate for the first time in 11 years by 50 basis points, to reach the highest rate since 2000, after traders had expected to raise interest rates at a lower rate of 25 basis points, noting that The European Central Bank’s decision is consistent with the trends of other central banks, which tightened their monetary policy, ending an 8-year experience, during which borrowing costs were below zero.
Al-Watani indicated that this sudden strict measure came in conjunction with the approval of a new political tool entitled “Transitional Protection Tool”, which is a new plan to buy bonds with the aim of helping the most indebted eurozone countries and reducing the large difference in price differentials for member states.
Speaking after the announcement of the decision, European Central Bank President Christine Lagarde justified the large interest rate increase, saying: “Inflation continues to rise undesirably and is expected to remain above the target level for some time. The latest data indicates a slowdown in growth, which overshadows expectations for the second half of 2022 and beyond.
The report pointed out that the European Central Bank is facing a more difficult task than most of its global peers, as regardless of the monetary policy position of the economies of the nineteen European countries, the risks of a recession are increasing due to the war in Ukraine, which caused high rates of food and fuel costs inflation. Germany, the largest economy in Europe, is the most vulnerable country in particular as a result of its heavy dependence on natural gas supplies from Russia, which became limited after the imposition of sanctions, but flows through the Nord Stream natural gas pipeline returned again last week after completing maintenance work, This provided some relief to the markets.
The report stated that economic activity contracted in July, coinciding with the contraction of the manufacturing sector and the stagnation of the services sector, as preliminary data for the eurozone revealed that the composite PMI fell to 49.4 in July, compared to 52 in June, falling below the 50 levels for the first time since February 2021, and with the exception of measures The closure to contain the pandemic, this is the first contraction recorded since 2013, while the mainstay of the European economy, the German economy, witnessed a decline in the Purchasing Managers’ Index for the manufacturing and services sectors to 49.2 points for both.
He stated that economists’ expectations point to recording modest growth rates, as these data are added to the indications that a recession may be imminent, while also highlighting the weakness of the eurozone economy, which is now facing a sudden decline in monetary stimulus measures following the establishment of the European “Central”. It raised interest rates for the first time in more than a decade.
While energy supplies remain a major concern, as Russia has scaled back natural gas flows in response to Western sanctions, Chris Williamson, chief economist at Standard & Poor’s Global, said: “The eurozone economy appears set to contract in the third quarter of the year. The year as business activity slipped into decline in July, and forward-looking indicators point to the worst in the coming months.” He added: “The heavy loss of new orders, the decline in business activities and their more gloomy outlook indicate the rate of decline that is gaining more momentum with the passage of the summer.” Cost of living in Britain
Recording historical levels
The “NBK” report indicated that Inflation in the United Kingdom reached its highest level recorded in 40 years during the month of June, coinciding with the rise in food and energy prices, which led to the escalation of the cost of the living crisis to historical levels, not witnessed by the country before, indicating an increase in the index of consumer prices increased by 9.4 percent on an annual basis, compared to 9.1 percent in May, exceeding expectations.
He added, “On a monthly basis, consumer prices rose by 0.8 percent after rising by 0.7 percent the previous month, and the index reading is still much lower than the 2.5 percent monthly increase recorded in April,” attributing the acceleration of the increase to The price of car fuel increased by about 9.3 percent during the month, while fuel prices rose last year by more than 40 percent, which led to the price of gasoline and diesel reaching record levels.
The report noted that the Bank of England has so far raised the interest rate 5 times in a row by 25 basis points as part of its efforts to curb Inflation without pushing the economy into recession, noting that with regard to the upcoming August meeting, Bank Governor Andrew Bailey said in a speech last week that The Monetary Policy Committee may think more hawkishly and raise the interest rate by 50 basis points, in what could be the largest rate increase in the UK in nearly 30 years.