“Markets due anyway”
Solid US economy fuels interest rate concerns – Dow eases
06.12.2022, 00:11
After the November rally, investors cash in. But even the recent robust economic data give the Fed little reason to back away from its tight interest rate policy. Investors are increasingly turning to the bond market again.
On the US stock markets, concerns about an aggressive interest rate policy by the US Federal Reserve determined trading at the beginning of the week. New economic data confirmed the strength of the US economy, which puts the central bank under pressure. Both the ISM index for the service sector and the order intake in industry were above expectations. The sub-index of prices at the ISM also exceeded forecasts. So, despite recent rate hikes, the US economy is booming. Of the Dow Jones Index lost 1.4 percent to 33,947 points. The broader one S&P 500 and the Nasdaq Composite lost 1.8 and 1.9 percent.
But the markets were due for losses anyway, said David Kelly, Chief Global Strategist at JPMorgan Funds: “The November rally, in which both equity and bond prices rose, was enough in itself to prevent a setback like today to make inevitable”.
At the end of the previous week, US labor market data, which were significantly better than expected, unsettled investors and fueled concerns about the US Federal Reserve’s continued tight interest rate policy. However, there is still around a 75 percent probability of a US interest rate hike of 50 basis points and not around 75 basis points in the coming week.
On the foreign exchange market showed the dollar index with strong US data attached. He gained 0.8 percent. the oil prices turned sharply lower after the dollar had strengthened significantly. In addition, the good economic data raised concerns that the Fed raising interest rates could reduce demand for oil. Prices fell by around three percent.
At the bond market yields recovered from the losses, also fueled by the strong economic data. The 10-year yield rose 9.9 basis points to 3.59 percent. Of the gold price declined significantly as bond yields rose. The price of the troy ounce was 1.6 percent lighter.
Among the individual values gave Tesla 6.4 percent after. The US electric carmaker’s stock reacted to agency reports that production at its Shanghai plant is set to be reduced due to falling demand. Tesla denied the reports. Fox reported on Sunday that Switzerland could ban electric vehicles due to power shortages.
the Apple stock lost 0.8 percent. In recent weeks, Apple has accelerated plans to move some of its manufacturing out of China, insiders told The Wall Street Journal. The company has urged its suppliers to more actively plan the assembly of Apple products in other Asian countries, particularly India and Vietnam, and reduce dependence on Taiwan’s assembly plants led by Foxconn Technology, it said. The Foxconn plant in Zhengzhou, China, was rocked by violent protests in late November.
Salesforce fell 7.4 percent. Stewart Butterfield, CEO and co-founder of communications service Slack Technologies, plans to leave the company. Salesforce acquired Slack in 2020.