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ECB just released its monetary report; ending net asset purchases as of July 1st, raising key interest rates by 25bps next month, and expects to raise rates again in September. There are also cuts to the growth outlook, 2022's forecast was lowered to 2.8% from 3.7% and 2023's to 2.1% from 2.8%. The calibration for the September hike will depend on the medium-term inflation outlook; a larger raise (50bps)  is on the table should the inflation situation deteriorate. 

Stocks fell on Tuesday morning as investors are assessing how surging borrowing costs could dent growth prospects and pressure valuation multiples. The dollar index (DXY) surged to a 5-day high, while both Stoxx50 and Nasdaq (futures) are trading 0.5% lower. Investors are reluctant to take on risk, but a more investor-friendly inflation report this Friday could help boost market sentiment. In the meantime, a speedier loosening of restrictions in China may help markets rebound. 

The US economy added 390k jobs in May, ahead of expectation, and the unemployment rate held steady at 3.6%, slightly higher than the 3.5% forecast. Average hourly earnings increased 0.3% in April, slightly lower than the 0.4% estimate and year-over-year wages increased 5.2%. The yield curve is steepening in response as the jobs report supports more rate hikes from the Fed in the future. Yields on the 10-year jumped 5.7 bp to 2.97%, its highest level in two weeks. The tech-heavy Nasdaq shed 1.4% in pre-market, slightly lower than before the jobs report. Market sentiment is weakening slightly after the Tesla announcement of a hiring freeze, cutting its workforce by 10%, and Musk's warning of a "super bad feeling" about the economy.    

Elon Musk announced Tesla is to cut staff by 10% and pauses all hiring. Tesla stock is down more than 3% in pre-market to USD749. Nasdaq100 futures are about 0.4% lower on some profit-taking after the strong advance of Thursday and ahead of a key US jobs report 1 hour before the US market opens. 

Concerns that interest rate hikes may cause a recession are keeping investors on edge about the outlook of the economy as rising food and energy costs squeeze consumers and the stock market has trended down this year. Some strategists continue to be cautious about markets, expecting downward revisions to earnings estimates in the coming months. So far, the earnings picture has been resilient and the partial removal of Covid restrictions in China could act as a positive catalyst. It could reduce supply-chain bottlenecks and ease inflationary pressures. Today will mark the first day of the Fed's shrinking of its USD8.9 trillion balance sheet. Later today, US PMI, new orders, and JOLTs job openings will be followed for more data on the strength of the economy. The S&P500 is slightly higher pre-market.