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Recession concerns rise as SNB, and Bank of England raise rates

rates graph pointing upwards

After breaking a six-day run of declines yesterday, European markets have resumed normal service to the downside, after the Swiss National Bank unexpectedly hiked rates by 50bps, following on from last night’s 75bps rate rise by the Federal Reserve, with the Bank of England following up with another 25bps.


Today’s declines have seen big falls across the board, below the lows this week, with all the major European markets falling to three-month lows, with the DAX and FTSE100 on course to head towards the levels we saw at the beginning of March in the aftermath of the initial Russian invasion of Ukraine. 

Today’s weakness has been across the board driven by energy, financials, and consumer discretionary with disappointing updates from ASOS and Boohoo Group showing that the outlook for fast fashion appears to be deteriorating even faster.

Both brands delivered disappointing assessments about their respective businesses, as consumers looked to pare back spending, while the underlying business struggles to maintain margins against a backdrop of rising costs.

ASOS shares have slid to their lowest levels in over 10 years after reporting that full year revenues were likely to be lower than forecast, with the retailer downgrading full year sales to 4% to 7%, from 10% to 15%. Q3 revenue fell to £983.4m with an expectation that full year profits were likely to be in the region of £20m to £60m. shares have also been hit hard, sliding to a 6-year low, after reporting an 8% decline in Q1 revenues to £445.7m. The main drag came from its US and European businesses which saw declines of 28% and 9% respectively. At the end of last year Boohoo said it hoped it would be able to consolidate its market share gains, however it looks like the reverse is happening, although Boohoo did keep its full year outlook unchanged. 

Other big fallers include Persimmon, 3i Group, Land Securities, RS Group and Intermediate Capital who are all trading ex-dividend.

BP and Shell are also down on the back of weakness in oil prices, which have declined for 5 days in a row. 

There was little in the way of bright spots, with Harbour Energy one of the few standouts after starting its $200m share buyback program.


Having seen such a strong finish yesterday, today’s slide in European markets has seen US markets open sharply lower, with the S&P500 opening below the lows that we saw earlier this week, while poor housing starts and building permits data for May increased concerns that the US economy is in the cusp of a sharp slowdown.

In the electric vehicle space, we’re seeing heavy falls from the likes of Tesla, Rivian, and NIO on concerns that sales will start to slow the course of the next 12 months.

Kroger shares are also lower despite posting revenues and profits that beat expectations. Q1 revenues came in at $44.6bn, while profits rose to $1.45c a share. Today’s weakness appears to have been driven by concerns that higher costs will eat into gross margins, which came in at 21.6%, below expectations of 22%. Overall, the picture was positive with the group raising its full year profits guidance from $3.80c a share to $3.90c mid-point.

Coinbase shares have remained under pressure along with cryptocurrencies with the risk that a break of $20k on bitcoin could trigger another bloodbath with MicroStrategy still under pressure over margin call concerns. 


The Swiss franc has surged after the Swiss National Bank unexpectedly hiked interest rates by 50bps from -0.75% to -0.25%, catching the markets off guard. Traders had been expecting a hawkish pivot after last night’s actions by the Federal Reserve, with a possible 25bps hike with a commitment to act further in July. It appears that the SNB has chosen to exercise decisiveness over a slow pivot given the franc was already close to two-year lows against the US dollar. The franc also rose to a two-month high against the euro.

The pound initially dropped sharply after the Bank of England hiked rates by 25bps to 1.25%, and the highest levels since 2009. There had been an expectation on the margins that the UK central bank might have been a bit bolder given how inflation is proving to be. As is so often the case with the Bank of England those expectations weren’t fulfilled.

In another own goal for its battered credibility with the British public, their decision was a smorgasbord of confusion. While confirming its decision to raise rates by 25bps, the accompanying statement was completely at odds with the decision itself.

In its statement the central bank said it would act “forcefully” on inflation if necessary. They then followed that up by saying they expect inflation to peak at an eye watering 11% by year end, an upgrade from its previous 10%, begging the question as to what level of inflation would justify a bigger hike? 

When set against that sort of narrative, and given what the Federal Reserve did last night, you would have expected to see a much more forceful response than the 25bps the Bank of England delivered today.

Today seems to be yet another example that gives the impression of a central bank that is all at sea when it comes to what its mandate should be. Nonetheless markets appear to be pricing the likelihood that the Bank of England will have to become much more aggressive when it meets next in August, where there will also be a press conference, as well as new grimmer forecasts. Maybe that’s why the bank chose to hold off from more aggressive action today, with UK 2-year gilt yields surging by over 25bps, to their highest levels since 2008. 

The Japanese yen is also enjoying a brief respite, ahead of tomorrow’s Bank of Japan rate meeting where the Japanese central banks current strategy of ignoring inflation risks, is likely to continue to be tested at a time when other central banks are tightening policy aggressively. 


Having slid back sharply yesterday US yields have rebounded strongly, although the US dollar is broadly weaker. With the decisions to hike rates by the Federal Reserve, the SNB and the Bank of England over the last 24 hours gold prices are trying to rebound from one-month lows. 

Crude oil prices have slide back two-week lows in the aftermath of yesterday’s Fed decision, as concerns over a pending recession raised renewed concerns over the demand outlook. Libyan supplies have continued to struggle to come back online, which is exacerbating supply concerns, and could well limit any downside.  

Copper prices are also under pressure over demand concerns, with the red metal falling to a one month low as central banks hike rates to address concerns over inflation and worries over Chinese demand act as a headwind.


Shares in French IT Services company ATOS remained in focus during Wednesday’s session with the underlying sliding by a further 5% amidst concerns over government intervention in the management of the company and how this may impact shareholder value. Daily vol sat at 402% compared to a monthly print of 156% as a result.

Volatility across cryptocurrency assets remains elevated too, although price action here is starting to calm following the spike seen at the start of the week. Tron was the standout, with daily vol of 230% being recorded against 109% on the month as underlying sentiment suggested that some support may now be emerging.

News from the ECB that it was planning to deploy new tools to ensure that fringe Eurozone economies didn’t get left behind as rate hikes got underway – the so-called fragmentation risk – was also well received by markets and gave the Italian index something to cheer. This rose by almost 3%, with daily vol printing 44% as a result, slightly down from levels seen earlier in the week.

Finally, in fiat currencies, one trade that perhaps wouldn’t have historically found itself tagged as being one of the most volatile was cable. Having made a brief foray below 1.20 on Tuesday, a degree of bargain hunting seems to have been in effect, with the pair advancing to almost 1.22 following that Fed rate call last night. Daily vol on Wednesday came in at 17.19% against 10.83% on the month.

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