(Bloomberg) – Stocks fell around the world as fears of a recession resurfaced, with the Federal Reserve struggling to overcome inflation that has proved more persistent and widespread than officials predicted.
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The S&P 500 was heading for its lowest level since December 2020, while the giants Apple Inc. and Tesla Inc. they helped drag the Nasdaq 100 around 4%. Twitter Inc. fell because Elon Musk was not asked directly and did not address the issue of whether he had promised to buy the social media company during a staff meeting. Home builders have fallen as mortgage rates have risen further since 1987.
10-year Treasury yields remained above 3.3%, while the dollar fell. Bitcoin made a gain of up to 6.1%, heading for its longest loss streak in Bloomberg data dating back to 2010.
Declaring that it is essential to control inflation, Jerome Powell on Wednesday designed the largest rate hike since 1994 and presented the possibility of another huge rise in July. Although the head of the Fed tried to soften the blow of the 75 basis point increase, saying he did not expect these moves to be the norm, he tacitly admitted the possibility of an economic recession.
“We are concerned about growth and where the Fed is ultimately leading us,” said Chris Gaffney, president of global markets at TIAA Bank. “Everyone said, ‘Well, the Fed is doing something aggressive, they’re going to be aggressive, they’re going to try to catch up with the inflation curve.’ chasing something they can’t catch? ‘
The central bank expects to lose money next year as rates rise in the short term, said New York Fed Chairman William Dudley. The losses will not affect the ability to pursue a monetary policy, but will deter officials from selling mortgage-backed securities because that would increase red ink, he added.
The story goes on
Read: The end of TINA sends stock traders looking for places to hide
While inflation is “out of control,” the Fed is doing the best it can given its limited tools, Orlando Bravo said. Despite the carnage we’ve seen on the stock market, ratings still have a lot more to drop, according to Jim Chanos, president and founder of Chanos & Company LP.
The S&P 500 now has an 85% chance of a recession in the United States amid fears of a Fed policy mistake, according to JPMorgan Chase & Co. Strategic warning of derivatives is based on the 26% drop in the indicator over the past 11 recessions and continues to collapse in a bear market.
A technical indicator of US equities shows the extent of the recent fall, while offering some optimism that will soon come to an end.
The percentage of S&P 500 members trading above their 50-day moving average sank below 5% this week, the lowest level since Covid-19 fears affected stocks more than two years ago. years. Both this sale and the one that reached the markets at the end of 2018 reversed direction shortly after seeing a similar share of the shares fall below the technical average closely observed.
More comments:
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“Our Fed’s main starting point is hawks, meaning the Fed will accept the risk of recession to deliver below-trend economic growth,” wrote Dennis DeBusschere, founder of 22V Research.
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“It’s not the next rise, July, that worries me,” said Simona Mocuta, chief economist at State Street Global Advisors. “That’s what it’s all about for the rest of the year and then until 2023.”
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“Concerns are growing about whether the Fed is heading for a political mistake,” said Quincy Krosby, LPL Financial’s equities strategist.
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“Despite their security, it’s not clear to me if the Fed has the tools they say they do to lower prices,” said Jason Brady, chief executive of Thornburg Investment Management.
Elsewhere, investors launched European bonds and the franc bounced back after a surprising Swiss-type rise. The pound rose as the Bank of England raised rates and indicated it is willing to trigger larger moves if necessary. Forex traders are betting that the Bank of Japan will offer a political surprise this week.
Read: Lagarde tells ministers that the ECB hopes to put limits on bond spreads
U.S. officials are working to arrange a possible call this summer between President Joe Biden and Chinese President Xi Jinping, according to two people in Washington familiar with the plans as tensions rise between the world’s two largest economies.
This week’s key events:
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Bank of Japan policy decision Friday.
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Eurozone CPI on Friday.
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US Conference Board Leading Index, Industrial Production, Friday
What are the next levels for the pound? The UK is the subject of this week’s MLIV Pulse survey. Click here to participate anonymously.
Some of the main movements in the markets:
Stocks
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The S&P 500 fell 3.3% at 2:09 p.m., New York time
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The Nasdaq 100 fell 4.1%
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The Dow Jones Industrial Average fell 2.4%
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MSCI World index fell 2.2%
Coins
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Bloomberg Dollar Spot index fell 1%
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The euro rose 1.4% to $ 1.0594
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The British pound rose 1.7% to $ 1.2381
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The Japanese yen rose 1.4% to $ 131.96
Good
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10-year Treasury bond yield rose five basis points to 3.33%
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Germany’s 10-year yield advanced seven basis points to 1.71%
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10-year yield in the UK rose five basis points to 2.52%
Goods
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West Texas Intermediate crude rose 1.9% to $ 117.47 a barrel
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Gold futures rose 1.8% to $ 1,851.60 an ounce
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