PARIS, Sept 29 (Reuters) – The New York Stock Exchange opened lower on Thursday amid renewed risk aversion fueled by the rapid rise in interest rates and its impact on economic conditions, while the project UK budget continues to cause concern.
In early trading, the Dow Jones index lost 261.79 points, or 0.88%, to 29,421.95 points and the broader Standard & Poor’s 500 fell 1.15% to 3,676.2 points.
The Nasdaq Composite lost 1.5%, or 165.61 points, to 10,886.02.
While the Bank of England’s (BoE) attempt to calm the markets is running out of steam, British Prime Minister Liz Truss remained straight in her boots by assuring Thursday that her draft budget, which plunged the country in a financial turmoil, was the best way to revive economic growth and protect its compatriots from the consequences of the energy crisis.
In this context, the pound sterling fell again on Thursday against the dollar, while benchmark bond yields resumed their march forward, the ten-year Treasuries rate taking nearly nine basis points to 3.8%. , a sign that the BoE’s announcement on Wednesday to buy British bonds as much as necessary over the next two weeks is no longer having an effect.
Added to the turbulence in the United Kingdom are fears about inflation, the risk of a recession and the rise in interest rates in Europe and the United States.
Price increases in Germany reached 10.9% in September, according to an initial estimate published on Thursday and several ECB officials have called for a further rise in the cost of credit of 75 points in October, while in the United States, the contraction of gross domestic product (GDP) in the second quarter was confirmed at -0.6% at an annualized rate.
The sharper than expected drop in jobless claims in the United States last week, to 193,000, is not even reassuring, since it reflects a still resilient labor market, which could comfort the American Federal Reserve in its projections of an interest rate hike to 4.60% in 2023.
“The market is reassessing macroeconomic risks and the catalyst this year has obviously been the Fed and other central banks starting to raise rates (..) The issue of debt sustainability and the financing of countries with current account deficits has become extremely real,” said Andrea Cicione, chief strategy officer at TS Lombard.
In stocks, the technology groups Amazon, Apple, Microsoft, Meta Platforms and Tesla lost 0.6% to 2.6%, in a context of renewed risk aversion, BofA Global Research having also lowered its recommendation on Apple to “neutral” against “buy”.
American airlines also fell, like Southwest Airlines (-1.75%), United Airlines Holdings (-1.57%) and Delta Air Lines (-2.33%), after the cancellation on Thursday nearly 2,000 flights due to Hurricane Ian.