Global markets are concerned about central bank strong interest rate hike inevitably triggering recession: on Friday local time, European and American stock markets fell sharply across the board, and risky assets such as stocks encountered a sell-off wave, among which the Dow Jones Industrial Average fell below the 30,000 point mark, setting a new low since November 2020. European and American bonds continue to rise in yields driven by interest rate hikes.
Crude oil futures fell sharply, US WTI crude oil fell below the $80 mark, hitting a new low since January this year, and energy stocks were hit and collectively fell by more than 5%.
driven by the continued interest rate hike of the Federal Reserve , the dollar index hit a new high in nearly 20 years, and many currencies depreciated sharply against the US dollar. The pound fell more than 3% against the US dollar on Friday, the biggest intraday drop since March 2020. After the euro exchange rate against the US dollar fell below par this year, the market is paying close attention to whether the pound sterling can reach parity against the US dollar.
US stocks fell four times in a row. The Dow Jones Index hit a new low for the year
On September 23, local time, Dow Jones Index fell more than 600 points during the session. As of the closing, the decline narrowed to nearly 500 points, a drop of 1.6%, breaking the 30,000 point mark, setting a new low since November 2020.
As of the close, the Dow Jones Industrial Average fell 486.27 points, or 1.62%, to 29,590.41 points; the Nasdaq fell 198.88 points, or 1.80%, to 10,867.93 points; the S&P 500 index fell 64.75 points, or 1.72%, to 3,693.24 points. It is worth noting that this is also the fourth consecutive trading day for the US stock market to fall.
On the market, all 11 sectors of the S&P 500 closed down, and the energy sector led the decline with a 6.75% decline. Large technology stocks generally fell, Tesla fell more than 4%, Amazon fell nearly 3%, AMD , Intel fell more than 2%, Apple , Microsoft , Google fell more than 1%. The oil and gas and nonferrous metals sectors led the decline, with BP falling by more than 8%, Chevron , Total and Century Aluminum falling by more than 6%, and Occupy Oil fell by more than 5%.
news, the US Markit manufacturing PMI released yesterday hit a stage high: the initial value of the US Markit service PMI in September was 49.2, the highest since June 2022, with an estimate of 45.5 and the previous value was 43.7. The initial value of the US Markit manufacturing PMI in September was 51.8, the highest since July 2022, with an estimated value of 51.0 and the previous value was 51.5.
US PMI data is better than expected, but this means the Fed may raise interest rates more aggressively. After the data was released, US stocks continued to fall, with the intraday decline of , Nasdaq, , and S&P 500. After the Fed announced its third rate hike of 75 basis points, market concerns over the Fed's tight monetary policy and a sharply slowing economic growth continue, and many investors believe or begin to accept that the U.S. economy is already on the road to recession.
html Within 0 days, the yields of US 2-year and 10-year US bonds have both hit highs that have not been seen in more than a decade. The rise in risk-free yields will suppress investors' preference for risky assets, which are expected to continue to put pressure on US stocks.European market stocks, bonds and exchanges three-kill
Also encountering "Black Friday" is the European financial market.
On September 23, local time, European stock market continued to decline after opening . As of the close, the European Stoke 50 index fell 2.29%; the UK FTSE 100 index fell 1.97%; Germany DAX index fell 1.97%; France CAC40 index fell 2.28%; the Portuguese benchmark stock index fell more than 3% at one point. In the bond market, as the market risk aversion sentiment heated up, euro zone treasury bonds were sold wildly, and bond market yields rose collectively. The yield on France's 10-year government bonds and the yield on Italy's 10-year government bonds both rose by more than 10 basis points. Germany's 10-year government bond yield rose to a new high since December 2011. Germany's 2-year government bond yield rose to 2% for the first time since 2008.
The European foreign exchange market was even more bleak that day. The euro-USD exchange rate has broken its low in nearly 20 years and has now fallen below 0.97 to 0.9691. Market analysts believe that the euro exchange rate 's current round of decline was mainly affected by the Fed's new interest rate hike.
HSBC Warns investors from European stocks
According to Xinhua News Agency , an executive of HSBC warned investors should avoid looking for value stocks in Europe because the European energy crisis makes it difficult to achieve returns when buying stocks in Europe.
Given that the European stock market's price-to-earnings ratio is currently low, according to common sense, investors will enter the European stock market to look for value stocks, that is, those stocks whose price is oversold . Investors buy this stock at low prices, waiting to reap stable long-term returns. However, William Zells, global chief investment officer at HSBC Private Banking and Wealth Management, said the lower P/E ratio in European stocks will not “compensate the additional risks you take.”
Zels said: "I think investors should choose where to invest based on their economic and profit prospects, so I don't think they should buy European stocks because of cheap valuations and interest rates."
Given the poor supply chain and the impact of the escalating situation in Ukraine on energy and food, Europe's macroeconomic outlook continues to stifle economic growth. European Central Bank had to raise interest rates in response to inflation. Data released by the European Statistics Office showed that the eurozone's inflation rate in August reached 9.1% at an annualized rate, far exceeding the 2% medium-term inflation target of the European Central Bank.
European Central Bank President Christina Lagarde said on the 220th that the European Central Bank will continue to raise interest rates and prevent high inflation from affecting economic behavior from becoming a long-term problem. The ECB raised key interest rates twice in July and September this year, raising interest rates by a total of 125 basis points.
pounds fell 3%! Will pound fall to parity with US dollar?
Also worth noting, the pound fell more than 3% against the US dollar on Friday, hitting the largest intraday decline since March 2020, setting a new low since 1985 to 1.0848. After the euro fell below parity to the US dollar this year, the market is paying close attention to whether the pound can reach parity to the US dollar.
On Friday, the pound fell below 1.10 against the US dollar for the first time since 1985, and has since fallen below 1.09 and fell more than 3% intraday, the largest drop in two and a half years. The yield on the 5-year UK Treasury bond once rose by nearly 60 basis points, the largest increase in history. The benchmark 10-year UK bond yield rose by more than 30 basis points in the day, which will eventually hit the largest single-day increase.
pound to US dollar trading history can be traced back to 250 years ago. At the beginning of this year, no one would think that the pound would be parity with the US dollar, but the market currently predicts that by the end of this year, there is a considerable probability that investors will "witness history." As the threat of the UK recession approaches, the surge in debt costs, and the possibility of limiting independence of the Bank of England, the parity between the pound and the dollar has gradually become a possibility.
On Friday, the pricing of the options market showed that the historic event of pound falling to parity against the US dollar was 26% likely to occur in the next six months, compared with a 14% chance a day ago.
The British government announced economic stimulus measures such as tax cuts and other tax cuts
0 The stock and bonds and foreign exchanges in the UK market have a lot to do with a series of economic stimulus measures announced by the British government on Friday.
According to CCTV News, the British government announced a series of measures on the 23rd to boost the economy, including large-scale tax cuts and the lifting of the banking industry bonus ceiling. Specifically, the tax reduction measures involve personal income tax , property tax, shopping consumption tax for overseas tourists and corporate tax. Tax cuts will result in a decrease in fiscal revenue, with taxes expected to be reduced by £45 billion in fiscal years 2026 to 2027. The British think tank Finance Institute believes that this will be the largest tax cut since 1972.
Associated Press report shows that many Conservatives do not agree with the current large-scale debt borrowing, and are worried that this will weaken the outside world's confidence in the British economy.
At present, the UK's economic growth is weak, coupled with the energy crisis and severe inflation, the cost of living has increased sharply. Since last winter, the inflation rate in the UK has remained high, with April to July this year hitting 40-year highs. Critics also pointed out that the government issued tax cuts and other measures but did not provide forecast data on how these measures will affect economic growth and liabilities, which is suspected of avoiding external scrutiny.
The global impact of the strong dollar is deepening
Driven by the continued interest rate hike of the Federal Reserve, the US dollar index hit a new high in nearly 20 years, and many currencies depreciated sharply against the US dollar.
For the United States, a stronger dollar means a decline in prices of imported goods, efforts to curb inflation have been strongly promoted, and the relative purchasing power of Americans has reached a new high. But the appreciation of the dollar is putting pressure on other countries, making it more expensive to repay the dollar debt borrowed by emerging market governments and businesses.
Ragulam Rajan, professor of finance at the University of Chicago Booth Business School, believes that the impact of this rate hike on other countries has just emerged. Just one day after the Federal Reserve announced the rate hike, central banks of seven countries including the United Kingdom, Switzerland , South Africa, Indonesia , all announced rate hikes.
JP Morgan chief Asian and Chinese stock strategist Liu Mingdi said that the market is currently in a relatively volatile situation. According to JPMorgan Chase's estimate, for every 2 percentage points increase in the US dollar index, the entire developing countries' stock market will be lowered by 3.8%, but the Asia-Pacific stock market will only lower by 2.9%, so the Asia-Pacific stock market will outperform accordingly.
In the case of strong US dollar and high expectations for interest rate hikes, two industries tend to perform poorly: one is industrial stocks and the other is materials stocks. On the other hand, defensive industries performed relatively well, including , telecommunications, , games, must-have consumption, medical and health care, etc. In addition, the financial sector often performs well.
column editor: Zhang Wu Text editor: Song Hui Title picture source: Shangguan Title picture Photo editor: Xu Jiamin
Source: Author: Shanghai Securities News
