Gold, treasuries, and the US Dollar led the team of gaining assets following the new turn and advance in the ongoing war between Russia and Ukraine. The new momentum rattled the market which was getting ready for a high Federal Reserve interest rate announcement.
Currencies Drop Except for the Dollar
The Euro also dropped the oil prices increased as the market reacted to the promise of the Russian government to deploy all necessary means into defending Russia’s territorial integrity. US and European stocks fell after Asian stocks that were already red from the beginning.
The US ten-year Treasury bond yields dropped by 4 points to 3.52%. German debts similar to that equally fell on Wednesday.
The US Dollar index traded close to its all-time high as there are jitters in the market, whereas Bitcoin fell under $19,000. The offshore Chinese Yuan dropped to the lowest point it had been against the US Dollar since the middle of 2020. This comes despite the Chinese central bank putting the reference rate for the Yuan at the strongest daily for the 20th day.
Officials of the Federal Reserve are about to announce their latest economic projection as they have given clues to. It is expected that the rates will be increased by 75 basis points once again, according to what analysts have said in surveys. But there is a 2% projection that there would be a 100-basis points rate increase.
Analysts Call a Recession
A senior financial analyst at City Index, Fiona Cincotta said that the volumes are light, and the market’s mood is cautious. She said there are a few hoping to carry large segments before they hear the Federal Reserve and know where policymakers might be going at the end of this rate cycle. That will be the factor that drives the market, not necessarily the coming rate increment, but what the Feds are planning to do, she added.
An analyst who predicted the financial crisis of 2008, Nouriel Roubini, said he is seeing a long, as well as ugly, recession coming up by the year’s end. He said the recession could last for the whole of 2023, and also the S&P 500 would have a sharp correction. He said further that the S&P 500 could fall by about 30% even in a plain recession, and fall by 40% in an actual hard landing, as is expected.
But some speculators are not surrendering to pruning of the equity market. When the S&P 500 index dipped last week, some hedge funds broke their stocks as they bet against the general market using products such as ETFs, according to Goldman Sachs data.