As uncertainty about the holidays and into the start of earnings season next month grows, a looming recession is weighing on the global stock market to five-week lows. A growing number of analysts worry the volatility should only grow in the weeks ahead. Businesses must disclose how much the cooling economy has affected business profits.
Global stock indexes extended losses after central banks warned that interest rates would remain high. It fell on Friday for the second week in a row. Guggenheim’s Scott Minerd warned that the Federal Reserve might spark a massive recession if it maintains its tight monetary strategy. According to him, stocks might fall another 20% as investors try to establish a market bottom.
The Dow Jones Industrial Average fell more than 900 points on Thursday. The stock market plummeted as well. Morning data showed retail sales declining faster than expected. Concerns grew yesterday that the country may be headed into a recession after the Fed on Wednesday reaffirmed its intention to lower inflation, even if it harms growth. This year, the Dow dropped 9%, while the tech-heavy Nasdaq fell 32%.
The tone of President Jerome Powell and his European counterpart Christine Lagarde this week was a blow to investors who were betting on a key rate cut in 2023. Both reaffirmed their commitment to keeping battling inflation by staying persistent. As a gauge of its strength increased the most since September on Thursday, the dollar weakened slightly versus most of its Group-of-10 counterparts. Currencies in the area declined as South Korean won and the Taiwanese dollar weakened. The yields on US Treasury bonds increased by a little.
The Impacts on A Global Scale
German short-dated bond yields have risen to their highest level since 2008, while European equities have tumbled the most since May. In both US commerce and Asia, the sentiment persisted. Even as the job market remained tight, traders were digesting poor US retail sales and manufacturing numbers. The Fed’s goal of softening the labor market continues to be a major focus.
Investors might argue that market risk premiums are still low. Marc Franklin claims that is due to the messages emerging from the ECB and the FOMC this week.
Around 200 mainland and Hong Kong firms were spared from being delisted by the US for investors in China. This, coupled with the Chinese government’s announcement to expand existing property-related regulations, bolstered market optimism. Concern about runaway Covid infections, on the other hand, persisted.
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