- Strong fall in stock markets throughout the world.
- Crash includes raw materials and strengthens the dollar, which appears as the only refuge.
- Despite risk aversion, sovereign bonds also fell sharply.
Markets are tumbling on Friday with Wall Street futures down more than 1% and major European markets down more than 2%. Commodity prices are also plummeting. The dollar at a 20-year high.
Everything falls except pessimism
In Europe, the FTSE 100 falls 2.20%, the DAX 2.53% and the CAC 40 2.25%. The S&P 500 lost 0.84% on Thursday and on Friday in the previous loses 1.35%. Various US market indicators are at their lowest since March 2021.
To the bad mood that investors already had in the face of a complicated economic panorama, the bad PMI data from Europe were added, which disappointed. At the same time, sovereign bond yields continue to rise. The combination of higher rates and recession expectations are pushing everything down. The Eurozone Composite PMI went from 48.9 to 48.2, Germany’s from 46.9 to 45.9 and France’s (the positive exception) rose from 50.4 to 51.2.
In Canada retail sales figures will be known and in US PMI data to be released. The head of the Federal Reserve, Jerome Powell, will speak publicly and at the same event will Governor Michelle Bowman and Vice President Lael Brainard. Companies reporting results on Friday include Carnival Corp, Smiths and Medmen.
The commodity prices they also suffer. Oil prices fall almost 4%, gold loses 1.40% and silver 3%. Not even agricultural commodities are spared. The cryptocurrencies are also in red: the Biyoucoin loses 1.75% and is below $19,000 and Ethereum loses 2.95%.
Government bonds also fall, offering no refuge. The US 10-year bond is at 3.80%, the highest since 2010, and the 2-year bond at 4.25%, 2007. The plunge in British shares is even more significant and they are on their way to having the worst day in decades .
The dollar still reigns
The context of rising yields and risk aversion is widely favoring the dollar which marked maximums in several years against several of its rivals. The DXY broke above 112.00, while EUR/USD dipped below 0.9800.
The pound has a private day and is by far the worst performer, affected not only by risk aversion but also by the budget announcement by Kwasi Kwarteng, the head of finance in the Liz Truss administration. The plan includes tax cuts and more debt ahead. GBP/USD is down more than 2%, reaching below 1.1050. EUR/GBP is at its highest in over a year above 0.8800.
The dollar is being the only renowned refuge, followed by the yen. USD/JPY rises modestly, with support in the yield spread outweighing risk aversion. On Thursday Japan announced an intervention in the markets that took the pair away from the peak above 145.00.
The commodity-linked currencies they are also at new lows, although with more moderate falls. Emerging market stocks are also under pressure and almost none are able to get around the strength of the dollar.
Technical levels
Source: Fx Street
