The US stock market continued to fall on the 16th. While digesting the hawkish stance shown in the minutes of the US Federal Open Market Committee (FOMC), it was a development that expanded the decline in the final stage.
S&P 500 Stock Index 4404.33-33.53-0.76% Dow Jones Industrial Average 34765.74-180.65-0.52% Nasdaq Composite Index 13474.63-156.42-1.15%
The minutes of the FOMC meeting (held on July 25 and 26) announced in the afternoon indicated the view that continued interest rate hikes may be necessary. The Nasdaq 100 index fell 2.2% from the previous day. Big tech stocks such as Meta Platforms Inc., Amazon.com Inc. and Tesla Inc. fell, pushing down the overall index.
FOMC Minutes: ‘Significant’ Inflation Risks Justify Further Tightening (2)
“The Fed has no choice but to continue with its current policy until it is confident that inflation expectations have subsided,” said Steve Sosnick, chief strategist at Interactive Brokers. “Taking a different course could rekindle risks that were about to subside. Two FOMC participants appeared to have preferred to keep rates unchanged at the July meeting, but note that a pause in rate hikes is not a turnaround. is important,” he said.
Technical factors are also behind the recent selloff. The S&P 500 index fell below its 50-day moving average for the second straight day.
S&P 500 stock index and 50-day moving average line
Source: Bloomberg
The minutes “repeated many of the core themes that Fed Chair Jerome Powell set out in his July press conference,” BMO Capital Markets strategist Ben Jeffery said in a note. pointing out. “While the September FOMC meeting again held off rate hikes, nothing has changed our assumption that another rate hike in November or December is quite possible if the data justify it. ‘ said.
The slump in the Chinese economy continues to be the focus of the market. Chinese authorities have taken a series of stimulus measures, including short-term injections of funds into the financial system, but the optimism has not returned to the market.
Markets have yet to fully reflect the risks associated with China’s deteriorating fundamentals, Pacific Investment Management (PIMCO) economist Tiffany Wilding said in a report.
“Deflationary spillovers are usually time-lag, so they appear to be just beginning to affect global consumer markets,” he said, adding that the downward trend in prices “is likely to accelerate in the coming quarters.” .
US Treasuries
The US Treasury market falls (yields rise). Yield gains widened in the afternoon, with the 10-year bond yield approaching 4.3%. Two-year bond yields approached the 5% mark. The FOMC meeting minutes hinted at another rate hike, putting pressure on bond prices.
JGB latest price change rate from previous business day (bp) US 30-year bond yield 4.36% 4.00.93% US 10-year bond yield 4.26% 4.51.08% US 2-year bond yield 4.97% 1.50.30% US Eastern time 16:00 51 minutes
foreign exchange
In the foreign exchange market, Bloomberg’s dollar index rose for five straight days and hit a two-month high. After the release of the FOMC meeting minutes, it was an expansion that extended the upper price.
The yen’s depreciation against the dollar expanded, and it temporarily dropped 0.6% to 146.41 yen. The depreciation of the yen exceeded the level when the Japanese government implemented the dollar-selling/yen-buying intervention in September last year. It has fallen against the dollar for eight consecutive days.
Bloomberg Dollar Index 1242.402.880.23%USD/JPY¥146.34¥0.770.53%EUR/USD$1.0880-$0.0025-0.23% 4:51pm ET
“The yen has found itself on a depreciating trajectory for the yuan,” said Steven Englander, global head of G10 FX research at Standard Chartered. “The rise in US Treasury yields has been a big driver,” he said.
Yen depreciates to 145.90 yen against US dollar, last year’s first intervention level in 24 years (2)
Adarsh Sinha, co-head of Asian FX and rates strategy at Bank of America (BofA), opposes yen depreciation, saying it is too early for traders to prepare for the risk of Japanese authorities’ intervention in the foreign exchange market. Political pressure is waning, he said.
Political lobbying “probably was much more intense last year than this year,” he said in an interview, with domestic demand strong and oil prices lower than they were in 2022. He suspected that the line the authorities were drawing last year was 150 yen to the dollar, and that if that level is reached, “of course we’ll have to take some defensive measures,” he said.
Yen may drop to 150 yen to $1 before intervention – BofA (1)
“The pace of the rally will matter if Japan’s Ministry of Finance takes action before waiting for the 150 level,” said Jane Foley, senior forex strategist at Rabobank.
Pound outperforms other 10 major currencies. Britain’s economic data raised the possibility of another rate hike by the Bank of England (British central bank).
UK Inflation Falls Smaller Than Expected in July, Rate Hike Pressure Increases
crude
New York crude oil futures fell for the third day in a row, reaching a three-week low. It was summer, and business was thin, and developments were affected by trends in the financial market as a whole.
As the stock market fell, so did the crude oil price. The minutes of the FOMC meeting hinted at the possibility of another rate hike, but that didn’t seem to boost confidence in oil demand.
U.S. oil inventories fell sharply last week, according to weekly data from the U.S. Energy Information Administration (EIA). Although it was a support factor for the market, it did not lead to a price increase.
“The prospects for the two big economies, the United States and China, have made Wall Street nervous and oil prices have a heavy topside,” said Ed Moya, senior market analyst at Oanda. “More and more traders think that the prospect of a soft landing in the US may not be good for overcoming inflation,” he said.
WTI Crude Oil Futures and Brent Futures
Source: NYMEX, ICE
West Texas Intermediate (WTI) futures on the New York Mercantile Exchange (NYMEX) for September contract closed at $79.38 a barrel, down $1.61 (2%) from the previous day. London ICE North Sea Brent for October contract fell $1.44, or 1.7%, to $83.45.
Money
Gold spot prices continued to fall, dropping below $1,900 an ounce. The FOMC minutes indicated the possibility of another interest rate hike, pushing the dollar and US Treasury yields higher, which weighed on gold prices.
Spot Gold Market and 10-Year US Treasury Yield
Source: Bloomberg
Gold prices have come under pressure in recent days as the market is conscious that the Fed will continue its tightening policy for a longer period of time. Rising interest rates make non-interest-bearing gold less attractive.
As of 2:36 pm New York time, the gold spot price was down 0.3% from the previous day to $1,897.12 an ounce. December gold futures on the New York Mercantile Exchange (COMEX) fell by $6.90, or 0.4%, to $1,928.30 before the release of the FOMC minutes.
Original title:Stocks, Bonds Fall as Rate Hikes Left on the Table: Markets Wrap(excerpt)
Dollar Advances After Fed Minutes; Yen Down 8th Day: Inside G-10（抜粋）
Yen Slumps to 2023 Low as Japan Intervention Debate Intensifies(excerpt)
Oil Hits Three-Week Low as Equity Woes Overshadow Tight Supplies(excerpt)
Gold Dips Below $1,900 as Fed Minutes Show More Hikes Likely（抜粋）
2023-08-16 20:52:00
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