Sep 30, 2022
VOT Research Desk
Key Insights and Analysis
After the Dow Jones Industrial Average and S&P 500 index continued to fall deeper into bear-market territory as investors digested a wave of remarks from members of the Federal Reserve indicating further rate increases that could throw the U.S. economy into a recession, December S&P 500 futures (ESZ22) are trending down -0.68% this morning. Utilities, Financials, and Consumer Goods sector losses weighed heavily on the Dow Jones Industrial Average and S&P 500, while gains in the Oil & Gas, Basic Materials, and Technology sectors helped the NASDAQ Composite index finish in the green.
James Bullard, president of the Federal Reserve Bank of St. Louis, made the comment on Tuesday that the Fed would need to maintain sufficient interest rates for “some time to make sure we’ve got the inflation problem under control.”Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, stated that the current rate of increase was “appropriate” and reiterated the Fed’s commitment to lowering inflation. In the meantime, U.S. rate futures have priced in a 44.9% chance of raising the rate by 50 basis points and a 55.1% chance of raising the rate by 75 basis points at the monetary policy meeting in November.
It is disappointing, but not unexpected. People are concerned about the Federal Reserve, the direction of interest rates, and the health of the economy.”
Participants in the market will pay close attention to today’s speeches by FOMC members Powell, Bostic, Bullard, and Bowman.
Investors will likely also pay attention to the U.S. Crude Oil Inventories data, which showed a gain of +1.142 million last week. The August Pending Home Sales data for the United States will also be released today, and economists anticipate the new figure to be +0.443 million. In comparison to the previous value of -1.0% m/m, economists anticipate this figure to be -1.4% m/m.
Rates on 10-year bonds in the United States currently stand at 3.990%, an increase of 0.69 percent.
This morning, concerns about the energy crisis and the worsening outlook for growth have reignited, causing the Euro Stoxx 50 to fall -0.85%.After the major indices closed lower, Wall Street and Asia have given European stocks a negative handover.
In addition, it is anticipated that the European Central Bank will keep raising interest rates to reduce inflation. At its meetings in October and December, Goldman Sachs anticipates that the ECB will increase interest rates by 75 basis points. After Europe initiated an investigation into large leaks into the Baltic Sea from two Nord Stream pipelines, the region’s problems were exacerbated.
Today saw the publication of the German GfK Consumer Climate Index, French Consumer Confidence, and Italian Consumer Confidence data.
The GfK Consumer Climate Index for Germany for October was reported at -42.5, which was lower than the economic forecast of -39.0.
The Consumer Confidence Index for September in France came in at 79, below expectations of 80.
The Consumer Confidence Index for September in Italy was 94.8, lower than the 95.1 that was anticipated.
Today, Asian stock markets closed in the red. The Shanghai Composite Index (SHCOMP) in China and the Nikkei 225 Stock Index (NIK) in Japan both closed lower by -1.50 percent.
Today, investors moved away from risky assets and into the arms of the safe-haven dollar as comments from officials at the Federal Reserve heightened their concerns about rising interest rates and caused the Shanghai Composite in China to close. On the back of government stimulus measures, Chinese stocks ended near 5-month lows, slightly outperforming their Asian counterparts.
According to Capital Economics’ head of global economics Jennifer McKeown, “It is now clear that central banks in advanced economies will make the current tightening cycle the most aggressive in three decades.”
At the same time, losses in the Transportation Equipment, Chemical, Petroleum & Plastic, and Construction sectors caused Japan’s Nikkei Stock Index to close lower today. The implied volatility of Nikkei 225 options is taken into account by the Nikkei Volatility, which ended the day at 24.48, down 2.59%.
