By Geoffrey Smith
Investing.com — The dollar is giving everything else a powerful kick as global markets price in the likelihood that the US Federal Reserve will hike rates even further, even at the risk of a global recession. Sterling and UK assets are having a particularly miserable time after the new government unveils a radical and – according to some – irresponsible plan to cut taxes. Boeing is paying $200 million to settle SEC fees that misled investors about the 737-MAX’s safety, and oil prices are testing new lows for the year as the dollar continues to appreciate. Here’s what you need to know about the financial markets on Friday, September 23rd.
1. Dollar rises as Treasury yields suck the life out of global markets
The dollar continued to soar, the latest bullish trend coming after surveys by purchasing managers in Europe showed both the US dollar and economies slipping into recession.
The , which tracks the greenback against a basket of six advanced-economy currencies, rose to a fresh 20-year high above 112 as rising short and long-term interest rates for the dollar continued to attract capital from around the world.
US Treasury yields continued to rise overnight as the market priced in the prospect of further rate hikes by the Federal Reserve. US Treasury yields, which are particularly sensitive to Fed expectations, rose to a fresh 15-year high of 4.26% before declining slightly.
2. UK markets in free fall after government announced massive tax cuts on top of energy subsidies
Stocks were in freefall across the board on Friday after financial markets reacted aggressively negatively to the new government in hopes of boosting growth.
The tumbled over 1.2% against the dollar to hit a new 37-year low of $1.1079 and also lost over 0.5% against the US dollar.
In the stock market, the index fell 1.6%, while the more UK-focused mid-cap index fell a more modest 0.6%.
Government bond yields across the yield curve hit their highest levels in years as traders priced in the prospect of much more borrowing to fund a budget deficit that is set to widen sharply on £45bn of tax cuts and energy subsidies pushed into the UK alone will cost around £60bn over the next six months.
3. Stocks set for weak open; Dow futures
US stocks will open sharply lower with hints of capitulation in the air as rising bond yields tighten financial conditions for the US and the global economy.
By 06:25 ET (10:25 GMT), they were trading below 30,000, down 290 points, or 1.0%, from Thursday’s close. decreased by 1.1% and by 1.2%.
Stocks that may be in focus later include Amazon (NASDAQ:), following a critical Wall Street Journal report on its drivers’ safety standards, and Boeing (NYSE:), which is set to pay the Securities and Exchange Commission’s fees, it misled investors about the safety of its 737 MAX aircraft.
Both the data and the results calendar are effectively empty.
4. Hong Kong and Thailand ease long-standing COVID restrictions
There was better news from Asia, as both Hong Kong and Thailand announced major relaxations of their respective public health measures to combat COVID-19.
Thailand will end a nationwide state of emergency that has been in place for two and a half years, downgrading the virus from a “dangerous” communicable disease to one that only needs surveillance. The emergency regime has dealt a severe blow to an economy that depends more than most on international tourism revenue.
In Hong Kong, meanwhile, authorities have lifted hotel quarantine for inbound travelers and signaled further relaxation is likely.
5. Oil slumps due to destruction fears; Number of rigs, CFTC due
Crude oil prices for the year as the rising dollar continued to make the world’s most important commodity less affordable.
By 06:30 ET, futures were down 2.6% to $81.39 a barrel, while futures were down 2.3% to $88.40, amid fresh news reports suggesting that OPEC and its Allies could cut production to stop prices falling further. The block is already producing more than 3.5 million barrels a day below its official production quotas, while a Russian government document quoted by news outlets on Thursday indicated Moscow expects its own oil production to come under the influence of sanctions next year will decrease by about 6 % .
and dates round out the week later.