Rate Anxieties and Recession Worries Drag Indexes Lower

Barry Adams
10 Oct, 2022
New York City

U.S. stocks traded lower ahead of the busy week of economic data and the kickoff of the earnings season. 

The dollar advanced for the fourth day in a row dragging major currencies around the world to multi-decade lows, reflecting a growing consensus that the Fed is set to lift rates at its next meeting in three weeks. 

The Fed's policy committee is scheduled to announce its rate decision on November 2, and investors are anticipating a fourth rate hike in a row of 75 basis points.  

Investors are also hoping that the September consumer price index data, scheduled to be released Thursday October 13, may show easing of inflation pressures.    

Tech stocks led the decliners in trading on Wall Street on the worries that the Fed will continue its aggressive rate hike plan, even if the economy dips to a recession and the labor market loses steam. 

The S&P 500 index fell 0.8% to 3,612.39 and the Nasdaq Composite declined 1.04% to 10,542.13. 

The Nasdaq is trading near a two-year low as chipmakers dive after President Biden's administration imposed more controls on the export of technology and equipment to China. 

Banks and financial services are in focus ahead of the start of the earnings season with Morgan Stanley, Goldman Sachs, JP Morgan Chase and Citigroup are scheduled to report this week. 

Crude oil declined $1.90 to $90.73 and natural gas dropped 21 cents to $6.53 a thermal unit. 

In Friday's trading, the yield on 2-year Treasury notes rose to 4.31%, 10-year Treasury notes jumped to 3.89% and 30-year bonds inched up to 3.84%.   

U.S. bond market was closed for trading for Columbus Day holiday.  

 

European Markets Erase Morning Losses 

European markets lacked direction in early trading and turned weaker after the indexes in New York opened lower. 

Market indexes closed down ahead of the start of the earnings season and investors also awaited the U.S. consumer price inflation data this week. 

The DAX index inched up 0.3% to 12,311.18, the CAC-40 index fell 0.1% to 5,860.04 and the FTSE 100 index fell 0.3% to 6,969.27. 

The euro declined 0.4% to 96.98 U.S. cents and the British pound eased 0.43% to $1.104. 

Brent crude oil edged down 2.3% to $95.59 a barrel and TTF natural gas dropped to a 3-month low of 154.12 euros a megawatt hour. 

The bond yields continued to rise across Europe on the worries that central banks are not likely to slowdown aggressive rate hike campaigns. 

The yield on 10-year German bonds rose to 2.32%, British Gilt advanced to 4.458% and Italian bonds increased to 4.61%.  

The rising economic uncertainties and government spending are also pushing the yields on the U.K. bonds closer to Italian bonds. 

 

Euro Zone Confidence Index Drops to 2020 Low 

The euro zone confidence index declined in September on the rising worries of inflation and growing uncertainties linked to the Russia-Ukraine war. 

The Sentix investor sentiment declined to -38.3 in October from -31.8 in September, the behavior research institute Sentix reported Monday.  

The index was at the lowest level since May 2020 and the current situation index dropped sharply to -35.5 from -26.5 in September.    

 

Swiss Jobless Rate Stable 

The Swiss franc held at 99.98 U.S. cents and the Canadian dollar inched up 0.1% to $1.373.  

The jobless rate declined marginally in September, according to the latest data released by the State Secretariat for the Economic Affairs.

The unadjusted Swiss unemployment rate fell to 1.9% in September from 2.0% in August and dropped from 2.6% a year ago.  

The seasonally adjusted jobless rate was unchanged at 2.1% in September from the previous month. 

 

Asian Markets Down on Rate Path Worries 

Benchmark indexes in Asia closed down on the worries that the higher rates will fuel further rise in the U.S. dollar and stoke worldwide inflation. 

The Nikkei 225 index declined 0.7% to 27,116.11, the Hang Seng Index plunged 2.9% to 17,216.66 and the the Sensex index decreased 0.3% to 57,991.11. 

The Indian rupee edged down to a new record low of 82.31 and the Japanese yen to a new 24-year low of 145.75. 

Then Korean won and Australian dollar also declined as the U.S. dollar continued its rise against major worldwide currencies. 

South Korea's current account turned to a deficit of $3.05 billion in August from the downwardly revised $0.79 billion, the Bank of Korea said Monday. 

The goods account turned to a deficit of $4.45 billion from $6.03 billion a year ago.