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Recession fears and high inflation top this week’s big market events

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US sharemarkets bounced as the Juneteenth long weekend provided a circuit breaker, allowing investors to regroup after US equity markets plunged more than 10 per cent over the previous two weeks.

The rebound was also supported by end-of-month, end-of-quarter and end-of-year rebalancing flows.

The ASX200 snapped its seven-day losing streak, supported by a rebound on Wall Street and the RBA governor hosing down the interest rates market’s aggressive pricing of RBA rate hikes (more below).

Here are the top five things that happened in markets this week.

1. RBA less hawkish than feared

In a speech on inflation and monetary policy at the American Chamber of Commerce in Australia, the RBA governor Philip Lowe reiterated that “Australians should be prepared for more interest rate increases”.

Providing some relief, the governor pushed back on expectations that the RBA would raise rates by 75 basis points next month and instead said the board would debate the merits of raising rates by 25 basis points or 50 basis points.

2. Fed chair acknowledges recession risks

In his semi-annual testimony to the US Senate, Federal Reserve chair Jerome Powell said that the Fed is “strongly, strongly committed to restoring price stability” and acknowledged that steep interest rate hikes could tip the US economy into recession.

3. UK headline inflation rises to a 40-year high, but core inflation eases

The annual inflation rate increased to 9.1 per cent in May, a 40-year high.

At 5.9 per cent year on year, the core inflation rate was lower than expected and sparked hopes that core inflation may have peaked in April at 6.2 per cent.

4. Crude oil falls again on ‘R’ word

Crude oil hit a five-week low, trading below $102 per barrel as Fed chair Powell warned that a US recession is possible, and a soft landing is “very challenging”.

5. Copper falls to a 15-month low

Talk of recession pummelled metal prices.

Copper fell to a 15-month low below $9000 a tonne, while aluminium traded below $2500 a tonne for the first time in 11 months.

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