Fed raises rates again to fight soaring inflation as US GDP contracts for second quarter in a row. The Federal Reserve said on Wednesday it would not shy away in its fight against historically high inflation in the US even if that means a "sustained period" of economic weakness and a slowing jobs market. In raising the benchmark overnight borrowing rate by 0.75 of a percentage point, taking the range up to 2.25-2.5 percent, the hikes in June and July represent the most stringent consecutive action since the Fed began using the overnight funds rate as the principal tool of monetary policy in the early 1990s. The central bank has been raising borrowing costs since March to try to ease price inflation. But fears are rising that higher interest rates will tip the US into recession. Indeed, coming on the heels of the Fed hike, the Bureau of Economic Analysis reported on Thursday that the US economy contracted for the second quarter in a row from April to June, hitting a widely accepted rule of thumb for a recession.

Eurozone economic confidence at 17-month low. Confidence among eurozone consumers and businesses fell sharply in July as high inflation and the prospect of a cut in gas supplies from Russia weighed on the sentiment of the citizens of counties that share the euro currency. The European Commission’s economic sentiment indicator (ESI) for the eurozone plummeted from 103.5 in June to 99 in July, below its long-term average. Among the largest member states, the ESI declined significantly in Spain (-5.0), Germany (-4.9) and Italy (-3.4), while it remained broadly stable in France and the Netherlands. "It seems clear that final demand is stalling. High inflation and the soaring costs of energy are, of course, major headwinds," Peter Vanden Houte Chief Economist for the eurozone at ING said.

Germany on cusp of recession, says Ifo. Morale among German businesses has fallen as rising prices for goods and fuel darken the country’s growth prospects, according to a survey by the German Ifo institute published on Monday. The Ifo's business climate index, a closely watched leading indicator for economic activity in Germany, dropped to 88.6 in July, its lowest reading in more than two years and below the 90.2 forecasted by analysts. June's reading was marginally revised down to 92.2. These worries over gas flows are one reason why German business confidence has slumped with the head of the Ifo saying that Europe’s largest economy is on the cusp of recession.

UK manufacturing eases in the three months to July. UK manufacturers saw demand weaken in the last three months and predict no improvement near term, but inflationary pressures also are showing signs of peaking. According to the Industrial Trends survey results from the Confederation of British Industry/Accenture, the output balance fell to +6 percent in three months to July from +25 percent in the quarter to June. Again, a net six percent expects output growth to expand in three months to October. Business optimism declined for the third straight quarter. Nonetheless, the score rose to -21 percent from -34 percent in the quarter to April. Manufacturers are still contending with sky-high costs and uncertainty and, while order books remain above normal for now, a continued easing in demand will test their resilience”, said Maddie Walker, head of industry X in the UK at Accenture.

China's industrial profits rebound in June though headwinds remain. Profits at China's industrial firms bounced back to growth in June after two months of decline. The June rebound was underpinned by the resumption of activity in major manufacturing hubs, but renewed curbs to activity due to Covid-19 restrictions cannot be excluded going forward. Industrial firms with annual revenues of at least 20 million RMB (2.95 million US dollars) saw their combined profits exceed 4.27 trillion yuan in the period, the National Bureau of Statistics said on Wednesday. The figure represented a one percent year-on-year increase compared with the same period last year. Combined revenues went up 9.1 percent from a year ago to 65.41 trillion yuan. Notwithstanding these positive signs, worries remain about the dire situation which the country’s property developers find themselves in.