GLOBAL MARKETS – Wall Street waters choppy amid negative macro ‘tsunami’
U.S. stocks and oil prices fell in choppy trade on Monday, while dollar and Treasury yields rose, as Wall Street digested a series of mixed macro news.
With markets already jittery over signals from the central bank for further interest rate hikes, the UK government’s fiscal plans released on Friday continued to rattle markets. The pound fell to a record low on Monday and a further sell-off in UK gilts pushed eurozone bond yields higher. U.S. Federal Reserve officials on Monday brushed off growing volatility in global markets, from falling U.S. stocks to overseas currency turmoil, and said their top priority remained controlling domestic inflation.
“I think everyone felt like they were swimming in a tsunami of news flow last week after one of the most incredible macro weeks in recent memory,” Deutsche Bank strategist Jim Reid wrote on Monday. , in a customer note. US equities were mixed at the start of the day, but quickly turned negative, again giving up their gains from the summer. The Dow Jones Industrial Average and S&P 500 both fell about 1%, while the Nasdaq Composite fell about 0.6%.
Global stocks also fell on worries about high interest rates and their strain on the financial system, although reaction to the election in Italy, where a right-wing alliance won a clear majority, was muted. . Europe’s STOXX 600 index slid 0.42% to its lowest level since December 2020. Asian equities ex-Japan fell 1.65%.
Wall Street’s so-called fear index, the VIX, rose around 6% on the day – approaching levels not seen since October 2020. “Here we have investors hit from all sides,” Ken Mahoney, managing director of Mahoney Asset Management in Montvale, New Jersey, said in an email.
“Including inflation not seen in four decades, the Federal Reserve has overreacted because it missed an opportunity last year to ‘hit the brakes’, instead it’s stepping on the brakes. brakes, and with a stronger dollar, that’s going to hurt profits.” CREATING STRESS
At the center of market jitters in recent days has been the pound, which fell to an all-time low against the dollar on Monday. The Bank of England said on Monday it would not hesitate to change interest rates and was watching markets “very closely” after the pound fell. The British pound last traded around 1.4%.
The pound’s decline was partly due to the strength of the dollar, which hit a new 20-year high at 114.58 in early trade. It was last at $114.06, up about 0.8%. On the bond side, eurozone government debt yields hit multi-year highs as central banks expect them to continue to tighten monetary policy.
In the United States, Treasury yields also reached new highs. Yields on two-year Treasury bills, which tend to be more sensitive to changes in interest rates, hit a nearly 15-year high of 4.315%, and yields on the benchmark 10-year note jumped at 3.894%. In commodities, oil prices hit nine-month lows in choppy trade on Monday, under pressure from a rising dollar as market participants awaited details on further sanctions on Russia.
U.S. crude fell 2.5% to $76.75 a barrel and Brent last traded at $84.04, down about 2.5% on the day. Gold prices hovered near a 2.5-year low on rising Treasury yields and a stronger dollar, while jitters over rising interest rates Americans hurt the attractiveness of non-performing bullion.
Spot gold fell 1.2% to $1,623.4 an ounce, having already hit its lowest price since April 2020 at $1,626.41. “There was economic logic at play, as central banks raised rates to drive monetary policy into restrictive territory, dip below trend growth for a while – a polite way of saying a recession – and then you get lower inflation,” Samy Chaar said. , chief economist at Lombard Odier.
“The question is whether the financial world can get through this streak. It feels like we’re reaching the limit of that, things are starting to break, for example what we’re seeing with the pound sterling.”
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)