[Mercato USA]Stocks continue to fall, US and Europe warn of continued interest rate hikes: Dollar climbs to high level of 137 yen-Bloomberg

In the financial market on the 15th, US stocks continued to fall and the dollar rose. The Federal Open Market Committee (FOMC) and the European Central Bank (ECB) have warned that rate hikes will continue for some time, as countries and regions raised policy rates this week.

buffer stock	closing price	Compared to the previous working day	Exchange rate
S&P 500 stock index	3895.75	-99.57	-2.5%
Dow Jones Industrial Average	33202.22	-764.13	-2.2%
NASDAQ Composite Index	10810.53	-360.36	-3.2%

The S&P 500 stock index closed at a one-month low. The Nasdaq 100 index, dominated by big tech stocks, fell more than 3%. European stocks also fell during the day. The ECB has revised upwards its inflation forecast for 2024.

The day before, Federal Reserve Chairman Jerome Powell reiterated his hawkish stance, urging FOMC participants to exceed expectations for a maximum policy rate. Risky activities are avoided due to this situation. The ECB and the Bank of England (BoE) agreed to raise interest rates by 0.5 points on the 15th.

Fed Chair Powell “still has a long way to go” – 0.5 points even after rate hikes slow (3)

ECB raises interest rates by 0.5 points, to continue with significant interest rate hikes – QT starts in March (2)

BoE raises interest rate by 0.5 points to 3.5% – highest level in 14 years (1)

Both the FOMC and the ECB cut their rate hikes to 0.5 percentage point, but Fed Chair Powell and ECB President Christine Lagarde said they would maintain their current stance on fighting inflation. The move went against market expectations of a more dovish tone for the authorities.

US economic data released on the 15th showed signs of an economic slowdown. Meanwhile, the job market remains strong. Markets have continued to digest such economic data.

US retail sales plunge for first time in 11 months, below market expectations (3)

The US manufacturing production index falls for the first time since June

“Today’s sell-off doesn’t come as a surprise to us,” said Nadia Lovell, senior US equity strategist at UBS Global Wealth Management. It was widespread, but yesterday the authorities sent a markedly different message.”

US treasures

Long-term US bonds are up. The 7-year bond has been repeatedly up and down, lacking a sense of direction. The yield curve has flattened.

state bonds	Last price	Year-on-year change (bps)	Exchange rate
US 30-year bond yield	3.50%	-3.45	-1.0%
10-year US Treasury yield	3.45%	-2.93	-0.8%
2-year US Treasury yield	4.24%	2.67	0.6%
		US Eastern Time	4:51 PM

foreign currency

The euro and the pound fell on the foreign exchange market. Both the ECB and the Bank of England slowed the pace of rate hikes. the dollar goes up. The US Fed’s aggressive stance provided a clue.

Analysts at Mitsubishi UFJ Financial Group (MUFG) wrote in a report that “the Fed’s latest aggressive stance will further support the dollar in the near term. That’s because it serves as a reminder to market participants not to just look at conversions.”

The yen depreciated against the dollar to the upper level of 137 yen. At one point, it fell to 138.17 yen, down 1.99% from the previous day.

Yen depreciates and expands, temporarily at low 138 yen range: Fed chair hawkishness buys dollars

money order	Last price	Compared to the previous working day	Exchange rate
Bloomberg dollar index	1263.16	12.19	1.0%
dollar/yen	¥137.78	¥2.30	1.7%
euro/dollar	$1.0628	– $0.54	-0.5%
		US Eastern Time	4:51 PM

raw

New York crude futures fell for the first time in four trading days. Fears of a global economic slowdown have reignited as major central banks have made it clear they will continue to hold back the economy in the fight against inflation.

The European Central Bank (ECB) has warned that it will continue to raise interest rates. The US Fed also announced similar intentions the day before, so the dollar soared and the stock market crashed that day.

The restart of parts of the Keystone pipeline connecting Canadian oil fields to refineries on the US Gulf Coast also added to the bearish sentiment.

West Texas Intermediate (WTI) futures contract on the New York Mercantile Exchange (NYMEX) for January closed at $76.11 a barrel, down $1.17 or 1.5 percent from the previous day. February delivery of London ICE North Sea Brent was down $1.49 to $81.21.

Money

The New York gold market continues to decline. The sell-off came after Fed Chairman Jerome Powell said the day before that he was nowhere near the end of his aggressive rate hikes, suggesting borrowing costs would be higher than expected next year.

“After failing to clear the resistance around $1,808 this week, there appears to be further consolidation underway, with prices approaching $1,745,” said Ole Hansen, head of commodities research at Saxo Bank. “A correction of this magnitude could set the stage for a strong move to test the upside. Such a move can be definitive and healthy.”