The stock market has continued its losing streak into Friday as futures in the US and Europe nose-dive lower. Shares in Asia are declining for the fifth consecutive week. But Treasury bond yields have been on the rise to reflect the market’s bet that there would be a jumbo Federal Reserve rate increase next week.
Stocks Drop Further
Stocks dropped as markets opened for business in Japan, Hong Kong, and Australia after the S&P 500 futures saw their poorest closing day in two months. Chinese stocks also dropped in the mainland, and it had little effect on the sentiments from industrial products, as well as retail sales reports that surpassed expectations.
The Yuan still remains weak against the US Dollar even though the Chinese central bank set the currency’s rate to be stronger than predictions for the 17th day in a row. Chetan Seth of Nomura Holdings said the activities in China showed improvement early on Friday. But investors are eager to see an ease of the country’s COVID policies and for it to become constructive.
The US Dollar fluctuated for a while and the two-year bond yields took a position close to the highest level it has been since 2007. The most recent economic report from the US revealed a mixed picture of the economy while it backed the Federal Reserve’s hawkish policies.
Waiting for the Feds
The market’s weakness came after reports show that US unemployment applications dropped for the fifth consecutive week. That indicates that the need for workers is at a healthy level. The retail sales also showed that consumers’ expenditure on goods is properly moderated.
Other data that came in revealed manufacturing to have increased a bit last month while the overall industrial production, which includes utilities and mining, dropped. The report from the University of Michigan expected Friday will be scanned for evidence of inflation.
Traders are said to have a bet that the Federal Reserve will increase interest rates by 75 basis points at its policy meeting next week, but some other traders bet there would be a 100 basis point increment. Many fear that the continuous rate increase is a precursor to recession and they brace up for it.
City Index’s Fiona Cincotta said the US market is just one waiting for a catalyst. She said the sell-off that was experienced on Tuesday is the market’s repricing of the Fed’s expectation. Till the Federal Reserve declares its next move, the market will not have much of a definite direction, she concluded.