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Money Flow – The focus today is on central bank statements

A wave of financial market sell-offs swept the world on Friday, as nervous investors were forced to once again face the specter of recession.

New signs of slowing global growth have rattled all kinds of investments.

The most notable action was that both the Dow Jones and the S&P 500 broke the lows they hit in June. Back in mid-August, there were many investors who were convinced that the indices had seen their bottoms and that a new positive trend was about to develop, but that is the nature of bear markets. Big rebounds suck in hopeful buyers and then crush them when another wave of selling hits.

All indices now look very bad as they hover around those June support levels, but it’s interesting to note that the market’s biggest stock, Apple (AAPL), isn’t even close to its June bottom . It enjoys very good relative strength. If it had returned to its June lows, the indices would be at least 5 to 10% lower than they are now. Apple is covering up some misfortunes and that might not be a good thing.

The obvious question now is whether we have enough negativity and gloom for some kind of reversal in the near term. It’s not worth thinking about a bottom right now, but there’s always the potential for some relief when things are this bad.

The market will be focused on the data and comments of Fed members.

Monday

10:00 – German Buba President Nagel Speaks
10:00 – ECB’s De Guindos and Panetta Speaks
16:00 – ECB President Lagarde Speaks
17:00 – FOMC Member Rosengren Speaks
19:00 – FOMC Member Bostic Speaks
23:00 – FOMC Member Mester Speaks

Increased market volatility is expected as investors closely monitor comments today.

Investors weighing on stubbornly high inflation and worried about Russia’s attempts to escalate the war in Ukraine fled for the exits last week, sparking a simultaneous selloff in stocks and bonds. Bond yields remained near their highest levels in more than a decade while prices collapsed.

The Dow on Friday lost 486.27 points, or 1.6%, to 29,590.41, its lowest close since November 2020. The S&P 500 fell 64.76 points, or 1.7 %, up to 3693.23. The Nasdaq Composite fell 198.88 points, or 1.8%, to 10,867.93.

Many investors are bracing for more volatility after the Fed’s commitment to fighting inflation became even clearer last week. On Wednesday, the central bank approved its third consecutive interest rate hike of 0.75 percentage points. That lifted the benchmark federal funds rate to a range last seen in early 2008 and continued the most aggressive path of increases in decades.

Fed officials also forecast interest rates to rise even more than expected, worrying investors who had been betting on a policy change next year. Many worry that the Fed’s rapid rate hikes will tip the US into recession.

Бизнес проучвания в петък показаха, че икономическата активност в Европа е намаляла рязко през септември, подчертавайки как растежът извън САЩ също е бил отклонен от курса. Междувременно щатският долар прави рали, което се случва веднъж на поколение, което заплашва да влоши забавянето на глобалния растеж и ефективно да изнесе инфлацията по целия свят.

Централните банки по света, включително политиците в Норвегия, Швейцария и Южна Африка, вдигнаха разходите по заемите.

Обикновено, когато акциите падат, облигациите предлагат убежище на нервните инвеститори. Но цените спадат и за двете тази година, необичайно съчетание, което подчертава колко разтревожени са много купувачи и колко рязко различна е била инвестиционната среда през първите девет месеца на годината. Доходността на 10-годишните съкровищни облигации и двугодишните държавни облигации отново се движи близо до нива, невиждани от повече от десетилетие.

Доходността на 10-годишните облигации на САЩ се повиши до 3,695% тази седмица, отбелязвайки осма поредна седмица на печалби. Доходността на двугодишните държавни облигации се покачи до 4,212%, най-високата стойност от октомври 2007 г. Доходността се покачва с падането на цените на облигациите.

Дали инвеститорите са станали твърде негативни за фондовия пазар след разпродажба, която повлече S&P 500 надолу с около 23% тази година? Според някои хедж фонд мениджъри пазара е достигнал пиковите нива на негативизъм.

Японската йена в петък възобнови спада си спрямо долара, само ден след като страната се намеси, за да повиши стойността си за първи път от 1998 г.


 Dealer Anatoliy Pavlov

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