Tuesday, September 26, 2023

Stock markets weaken as US dollar continues to rebound

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Global stocks slipped on Monday after their best week since November, as the US dollar regained lost ground as the global coronavirus pandemic worsened.

Wall Street’s benchmark S&P 500 fell 0.6% in afternoon trading in New York, while the highly technological Nasdaq Composite slid 1%.

T-bills also weakened, with the yield on the 10-year note rising for the fifth day in a row to 1.13%, the highest level since March 2020.

The cuts in the United States were led by interest rate sensitive stocks, including utilities and real estate groups, as well as technology companies that had moved over the weekend to ban or suspend US President Donald Trump from their platforms.

Shares of Twitter fell 7% while Facebook fell 3%.

European indices broken winning streak from last week posting losses across the board as the worsening health crisis caught the attention of investors. The region’s benchmark, the Stoxx 600, closed 0.7% lower, London’s FTSE 100 lost 1.1% and Frankfurt’s Xetra Dax lost 0.8%.

“The first quarter of the year will be worse than expected due to [renewed European] lockdowns everywhere, ”said Jean-François Robin, head of global market research at Natixis. “We expected a little [of a] better start the year. “

The FTSE All World Index was 0.6% lower, marking its worst day in three weeks.

Monday’s losses came after a good start to 2021 for global equities, with the prospect of another fiscal stimulus in the United States adding to optimism over Covid-19 vaccines and hopes for a rebound in the global economy.

“In the short term, there is a very real and present danger that the United States could double in the first quarter,” said Richard Saperstein, chief investment officer at Treasury Partners. “We saw the first signs of this with the jobs report last week.”

He said the prospect of Covid-19 vaccines and further stimulus measures had fueled market optimism, but that “if we start to see further surges in Covid-related hospitalizations and deaths, I’m concerned that the ‘market enthusiasm does not turn in the short term’.

Salman Baig, multi-asset investment manager at Unigestion, stressed that equity valuations remain high, with great optimism already embedded. “The profit season will start in the next few weeks; depending on the tone set by some of these companies, it could be difficult, given the valuation situation, ”he said.

The dollar, measured against a basket of peers, rose 0.4%, or 0.6% more for the year. The US currency was raised with Treasury yields on a bet Democratic control of Congress will mean more stimulus for the US economy.

The dollar lost about 7% last year after interest rate cuts by the Federal Reserve reduced the attractiveness of dollar assets and encouraged investors to bet on riskier currencies, such as China. renminbi. Some analysts wait the rebound will be short-lived, with inflation expectations rising while interest rates are expected to remain low for the foreseeable future.

Lee Hardman, currency analyst at MUFG, said the rise in US yields “temporarily triggered a jolt in high short US dollar positions”, which had risen significantly over the past month.

The euro, which has rebounded sharply in recent months, slipped 0.4% against the dollar on Monday to $ 1.2167, while the British pound fell 0.3% to $ 1.3527.

In Asia, China’s CSI 300 index slipped 1% as banks and stock exchanges began to adhere to the president’s decree banning investments in companies with suspected ties to the Chinese military. However, the Japanese Topix jumped 1.6% to its highest level since 2018.


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