Positive US economic reports strengthened the case for the Fed to stay on the tightening path
Wall Street stocks saw another bearish session on Tuesday as risk aversion intensified after hawkish comments from Fed officials. The S&P 500 gave up 0.21% to set a new 2022 low as the 10-year Treasury yield climbed to levels not seen in at least a decade. The Dow Jones Industrial Average fell 0.43% and is now more than 21% below its all-time high. The Nasdaq Composite bucked the trend to add 0.25%. On the data front, new home sales came in at 685,000 in August, beating consensus expectations. Meanwhile, the CB’s consumer confidence indicator jumped to the highest level since April.
Asian equities tumbled on Wednesday as investors stayed cautious. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.89%, reaching lowest levels since April 2020. The Kospi in South Korea shed 2.45%, Japan’s Nikkei 225 fell 1.50%, while Hong Kong’s Hang Seng index fell 3%. In mainland China, the Shanghai Composite was 1.26% lower while the offshore and onshore Chinese yuan reached weakest levels since 2008.
In Europe, stocks opened lower today as positive US economic reports strengthened the case for the Fed to stay on the tightening path. Also, Fed’s Bullard and Kashkari said that more interest rate hikes were likely in order. On the data front in the region, French consumer confidence came in at 79 in September versus 80 expected. Consumer morale fell further to reach its lowest level since June 2013. The decline was primarily due to inflation concerns. Germany’s October GfK consumer sentiment came in at -42.5 versus -39.0 expected.
Meanwhile, the US dollar surged to fresh two-decade highs around 114.70 and was last seen clinging to the upper end of the extended trading range as US Treasury yields stays elevated while safe-haven demand persists. As such, EURUSD plunged below 0.9550 for the first time in more than twenty years, with energy crisis in Europe adding to bearish tone surrounding the shared currency. Should the pressure persist, the pair could threaten the 0.9500 mark next.