Major US benchmarks fell for a third straight trading day as central bank rate hikes continued to weigh on sentiment. After the Fed, the Swiss National and Bank of England hiked rates by 75 basis points and 50 basis points, respectively. The Bank of Japan intervened on the exchange rate by selling USD and buying Yen for the first time since 1998, sending USD/JPY down 1.2%. However, a further rise in US bond yields continued to propel the US dollar higher, with the Dollar Index gaining 0.6% on Thursday. Amid decades of high inflation, major central banks are accelerating the pace of interest rate hikes, pushing interest rates to their highest levels in more than a decade, which could pave the way for a global economic recession.Click to enlarge the diagram
- The Dow fell 0.36%, the S&P 500 slipped 0.84% and the Nasdaq fell 1.37%. Both the Dow and the S&P 500 fell 13% from their August high, and the Nasdaq fell 16% over the same period. Nine out of 11 sectors ended lower, with consumer discretionary (-2.16%) and financials (-1.66%) leading the losses, while healthcare and communications services were up 0.51% and 0.06% respectively achieved an outperformance.
- Boeing stock fell 3.2% after China confirmed a $4.8 billion purchase of 40 jets from Airbus SE. The deal meant a loss of the world’s largest aerospace manufacturer’s Chinese market following crashes of its 737 Max, as well as heightened geopolitical tensions between China and the US.
- The Swiss National Bank has increased the key interest rate by 75 basis points for the second time in a row, bringing the rate to 0.50%, the first time out of negative territory since 2011. The bank has kept its interest rate at -0.75% since 2015. However, the Swiss franc lost 2% against the eurodollar as traders anticipated a larger hike.
- The Bank of England raised interest rates by 50 basis points to 2.25%, the highest level since 2008. The bank said the UK may already be in recession, with GDP forecast to contract by 0.1% in the third quarter, followed by negative growth of 0.1% in the second quarter.
- Asian markets are expected to open lower as the rise in US bond yields puts pressure on local interest rates, accelerating the depreciation of regional currencies and increasing their domestic inflationary pressures. ASX futures fell 0.26%. Nikkei225 futures fell 0.85% and Hang Seng index futures fell 0.37%.
- Crude oil prices retreated from session highs as commodities remained under pressure from a strong US dollar and recession fears. Gold was flat but consolidated above the recent key support at 1,650, suggesting that the current risk aversion favors the safe haven among investors.
- Bitcoin recovered from a two-year lowwhich is a key support of just over 18,000. Despite a slump in stock markets, cryptocurrencies in general are up, with XRP up 23% over the past 24 hours. The robust movements in the digital coins suggest that traders could be looking for a bottom.
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