The expected tightening of monetary policy by the US central bank and the Ukraine crisis are causing nervousness on the stock exchange. The Euro Stoxx 50 lost more than four percent on Monday. Important events are coming up this week.
Bitcoin fell to its lowest level in around half a year on Monday afternoon.
On the stock exchanges, the downturn of the past week is continuing. Share prices around the world fell sharply on Monday, led by technology stocks. Other alleged investments that are considered risky, such as the cryptocurrency Bitcoin, also lost significantly. The tighter monetary policy announced by the US Federal Reserve and the ongoing tensions between Russia and Ukraine weighed on investor sentiment.
Netflix shares down 45 percent
In the USA, the leading barometer S&P 500 lost two percent in value by the evening. It was more than 10 percent below its record high of 4818 points reached this month, in what the financial markets are calling a correction. The tech-heavy stock market barometer Nasdaq was down 2.7 percent by the evening and was more than 17 percent below its November record high for the day. When a price loss on the stock market reaches 20 percent or more, investors officially speak of a “bear market”.
The shares of the streaming provider Netflix, for example, were hit particularly hard, having lost around 45 percent in value since the beginning of the year. The company announced subscriber numbers last week that were well below market observers’ expectations. Technology stocks have often made particularly strong gains during the pandemic, and many investors are now worried that prices have “overheated” and are facing further corrections.
In Europe, too, the stock exchanges were clearly in the red. The Euro-Stoxx 50, the index of the 50 largest listed companies in the euro zone, lost 4.1 percent on Monday. The German DAX lost 3.8 percent. The leading barometer for Swiss standard values, the Swiss Market Index (SMI), meanwhile went down 3.8 percent from trading. However, the price losses should be put in relation to the massive price gains of the past few years (see chart).
In the SMI, Credit Suisse shares lost 6.8 percent on Monday, Logitech shares 5.9 percent and Sika shares 5.7 percent. This put them at the end of the price table. The shares of Swiss Re and Swisscom held up best, posting only a slight minus.
More clarity expected from the Fed
A potpourri of reasons is blamed for the recent slump in prices. The most important reason is the tighter monetary policy announced by the US Federal Reserve due to the significantly higher inflation figures. Bank Goldman Sachs commented over the weekend that the Federal Reserve could raise interest rates more than four times this year. The financial house’s economists expect the US Federal Reserve to start raising interest rates in March.
Higher interest rates mean higher financing costs for companies and depress the expected profits of companies in investors’ calculation models. Meanwhile, the next meeting of the Federal Reserve Board is scheduled for Wednesday. Observers expect that there will then be more clarity about the future monetary policy course of the American central bank.
Another reason for the bad mood on the financial markets is the recently increased tension in the Ukraine conflict, in which Russia and Western countries with NATO, the USA and the EU are facing each other. The conflict could also exacerbate the energy crisis. In addition, the reporting season for companies in the USA got off to a slow start, and the omicron variant of the corona virus is making economic conditions more difficult in many places.
“Anxiety barometer” rises significantly
The uncertainty on the markets is also reflected in the development of the VIX volatility index, known as the “fear barometer”. This measures the volatility in the US standard value barometer S&P 500 and has recently risen to 36.6 points. The VIX has thus reached its highest level since January last year.
Meanwhile, the franc was once again in demand as a safe haven. On Monday evening, the euro-franc rate was CHF 1.0343. Temporarily even the CHF 1.03 mark was broken through. Fr. 0.9127 were paid for one dollar in the evening.
Meanwhile, there were further losses in cryptocurrencies. Bitcoin fell to $32,970 on Monday afternoon, its lowest level in around half a year, according to an agency report. Cryptocurrencies are considered risky assets that investors withdraw from when times are tough.