Beijing time on Tuesday (September 27) in early Asian trading, the US dollar index traded around 114.12; the US dollar refreshed a 20-year high to 114.68 on Monday, benefiting from the pound plunging more than 500 pounds and the euro hitting a 20-year low. Gold prices hovered near a 2-1/2-year low as investors worried that Britain’s new economic plan would hurt the country’s finances; oil prices closed at a nine-month low, weighed down by a stronger dollar as market participants awaited details on new sanctions on Russia.
Commodity closing:Brent crude futures for November settled down 2.4% at $84.06 a barrel, falling below a low hit on Jan. 14. U.S. crude futures for November fell 2.3% to $76.71 a barrel, the lowest since Jan. 6. U.S. gold futures fell 1.3 percent to settle at $1,633.40.
U.S. stock market close:The Dow Jones Industrial Average fell 1.11% to end at 29,260.81, the S&P 500 fell 1.03% to 3,655.04 and the Nasdaq lost 0.6% to 10,802.92.
18:15 Chicago Fed President Evans delivered a speech, 21:15 ECB Vice President Jindos delivered a speech, St. Louis Fed President Bullard delivered a speech on the US economy and monetary policy.
Global Market at a Glance
U.S. stocks sank deeper into a bear market on Monday, with the S&P 500 and Dow ending lower as investors worried that the Federal Reserve’s aggressive anti-inflation action could tip the U.S. economy into a deep recession.
The Dow confirms it has been in a bear market since early January after a two-week slump. The S&P 500, which was confirmed to be in a bear market in June, closed below its mid-June closing low on Monday, extending its overall losses for the year.
The S&P 500 has given up all of the gains it made during the summer’s rally after the Federal Reserve signaled last Wednesday that high interest rates are likely to continue into 2023.
Jake Dollarhide, chief executive of Longbow Asset Management, said, “Investors have raised their hands in capitulation because of the uncertainty about the federal funds terminal rate, 4.6%, or 5%? Sometime in 2023?”
Violent swings in global foreign exchange markets have also shaken the confidence of stock traders, with the pound hitting a record low against the dollar on fears that Britain’s new government’s fiscal plan released on Friday could stretch the country’s finances.
That has fueled volatility in markets, with investors fearing a global recession with inflation at multi-decade highs. The CBOE Volatility Index hovered near a three-month high.
According to a widely used definition, an index closes 20% or more below its record high close to confirm the index is in a bear market. The Dow is now down 20.5% from its record high close on Jan. 4, thus confirming that it has been in a bear market since January.
The S&P 500 has yet to break below its June 17 intraday low. So far in 2022, the index has fallen by about 23%; 11.9 billion shares have traded on U.S. exchanges, and the average daily volume over the past 20 trading days is 11.2 billion shares.
Gold prices hovered near 2-1/2-year lows on Monday as U.S. Treasury yields climbed and the dollar strengthened, while worries about rising U.S. interest rates dented the appeal of the non-yielding asset. “Gold is not the only safe-haven asset, money is also flowing into U.S. Treasuries,” said Bob Haberkorn, senior market strategist at RJO Futures. Gold’s outlook depends on the Fed, adding, “If you’re a gold investor, you have to go through it now. A storm.”
Gold has lost more than $400, or more than 20%, since breaking above the key $2,000 an ounce level in March as major central banks raised interest rates. In the physical gold market, data on Monday showed that the Asian giant’s net gold imports jumped nearly 40% in August, the most in more than four years.
Spot silver fell 2.5% to $18.37 an ounce, platinum fell 0.4% to $850.43 an ounce and palladium dipped 0.8% to $2,050.79.
Oil prices fell $2 in choppy trade on Monday to settle at their lowest in nine months, weighed down by a stronger dollar as market participants awaited details on new sanctions on Russia. Both contracts were up earlier in the session, before slumping about 5% on Friday. The U.S. dollar index hit a fresh 20-year high, weighing on demand for U.S. dollar-denominated oil. A strong dollar had the biggest impact on oil prices in more than a year, according to Refinitiv Eikon data.
“It’s hard for anyone to expect oil prices to rebound when the dollar is so expensive,” said Bob Yawger, head of energy futures at Mizuho Bank. Disruptions from the Russia-Ukraine war have also hit the oil market, and EU sanctions banning Russian crude imports will be slated for It comes into effect in December, while a plan by the G7 to set a price cap for Russian oil could lead to tighter supplies.
Central banks in many oil-consuming countries have raised interest rates, sparking fears of an economic slowdown that could squeeze oil demand. Attention is turning to what action will be taken by the OPEC+ alliance when it meets on Oct. 5, where it had already agreed to a small output cut. However, OPEC+ production is well below target, meaning further cuts may not have much of an impact on supply.
The dollar rose against a basket of currencies on Monday, hitting a fresh two-year high of 114.68 during the session. Sterling fell to a record low against the dollar on Monday as investors worried that Britain’s new economic plan would hurt the country’s finances, while the Bank of England said it was watching financial markets “very closely” after sharp swings in asset prices.
The dollar hit a fresh 20-year high against a basket of six major currencies, helped by a plunge in the pound and a fresh 20-year low in the euro. In Japan, authorities reiterated that they stand ready to respond to speculative currency moves, intervening last week for the first time since 1998 to support the yen. Sterling fell as much as 4.9% in Asian trading to a record low of $1.0327, extending a 3.6% drop recorded on Friday, when new finance minister Quarten unveiled historic tax cuts and announced they would pass the largest since 1972 to issue bonds to raise funds for this. British government bond prices also collapsed.
Derek Holt, head of capital markets economics at Scotiabank, said: “UK markets tumbled again after the Truss government released a generous fiscal package on Friday, despite the bond market’s feelings, as the bond market loathes anything that stokes inflation risks and increases bond issuance. Sterling largely recovered overnight losses as traders speculated that the Bank of England could take emergency action to stem the decline, but did not signal any immediate action after BoE Governor Bailey said the central bank was watching market performance Afterwards, the British pound plummeted again.
“This communication may have disappointed some people who were expecting some intervention from the Bank of England,” said Bipan Rai, head of North American FX strategy at CIBC Capital Markets, senior financial markets analyst at City Index. Fiona Cincotta said, “The market’s reaction shows that investors have lost confidence in the government’s approach, creating a level of volatility that has put the pound in the company of some emerging market currencies.”
“It now looks like the Bank of England is likely to be forced to raise interest rates significantly at its upcoming November meeting, if no emergency intervention has taken place before,” she said. The euro also hit a fresh 20-year low of $0.9528, falling late in the session. 0.81%.
Seema Shah, chief strategist at Principal Global Investors, said: “The focus is on the pound, but the dollar story is much broader, and that’s the downside.”
The dollar rose 0.84% to 144.585 against the yen, recovering from a 24-year peak of 145.90 hit on Thursday. On the day, the dollar fell to around 140.31 after Japan intervened by buying the yen for the first time in more than 20 years.
Japan is estimated to have spent about $25 billion in that intervention to sell dollars and buy yen, according to estimates from a brokerage firm in Tokyo’s foreign exchange market. The risk-sensitive Aussie touched $0.6438, its lowest since May 2020, and was last down 1.02%.
Nigeria’s national grid collapses for seventh time this year
On September 26, local time, Nigeria’s national grid collapsed for the seventh time since 2022, again causing nationwide power outages, while the number of grid collapses in the country in 2021 was three. While the National Transmission Corporation of Nigeria has yet to determine the cause of the accident, some insiders say the grid collapse may have been the result of maintenance on a 330-kilovolt transmission line in the country’s northwestern state of Bauchi. Nigeria’s power infrastructure is weak, and the power generation and transmission and transformation capabilities are seriously insufficient. While the national power grid has repeatedly collapsed, fuel prices have also skyrocketed since the end of February this year, which has had a serious impact on the country’s economy and society. (CCTV News)
Moscow Exchange Index closes below 2,000 for first time in 5 years
The Moscow Exchange index closed at 1,933.35 at the end of the main trading session on the 26th, closing below 2,000 for the first time in five years. In late trading that day, the index continued to fall, falling below 1900 points. Shares in the technology and materials sectors fell the most amid heightened tensions over Ukraine and a partial mobilization in Russia, as risk aversion intensified as capital ditched riskier assets. In addition, analysts believe that the Moscow Exchange Index may continue to fall to the 1700-1800 point range, considering external sanctions pressure and a possible increase in the tax burden on the private sector. (CCTV News)
Italian centre-right coalition wins parliamentary majority
On September 26, local time, the Italian Ministry of the Interior announced the results of the vast majority of polling stations in the parliamentary elections. The center-right coalition of political parties, mainly composed of the Italian Brotherhood, the League and Forza Italia, won 44% and 43.8% of the votes in the Senate and the House of Representatives respectively, and won 112 and 235 seats in the Senate and House of Representatives respectively, winning the parliamentary majority. According to the election agreement of the center-right party alliance, the party leader Meloni is likely to become Italy’s first female prime minister.
On September 26, local time, the 2022 “China Railway Express – China International Import Expo” bound for Shanghai departed from Hamburg, Germany. This is the second consecutive year that the exhibits at the China International Import Expo have traveled from Hamburg to Shanghai by the China-Europe train. The train has a total of 44 40-foot containers, of which 14 are loaded with German exhibits such as auto parts and pipes that participated in the 5th CIIE. After being reorganized in Malaszewicz, Poland, the train will pass through Belarus and Russia, enter through the Manzhouli port, and is expected to arrive in Shanghai in 22 days. (CCTV News)
Hungarian PM Orban says EU sanctions on Russia ‘counterproductive’
On September 26, local time, Hungarian Prime Minister Orban delivered a speech on the opening day of the autumn session of the Congress, severely criticizing the EU’s sanctions policy against Russia as “counterproductive” and “smashed in the foot”. Orban said the Western sanctions had escalated a local conflict between Russia and Ukraine into a “global economic war” that threatened the economic security of Europe and the world. Political decisions in Brussels have caused energy prices to soar, and European countries are now paying much higher “sanctions surcharges” for oil, gas and electricity than the United States, making Europeans poorer because of sanctions. (CCTV News)
Economic crisis deepens, Germany prepares to implement electricity price cap
German government officials said Germany will prepare to impose a national electricity price cap this fall if the EU fails to agree on a similar move across the bloc. The cap will protect consumers and businesses from further increases in energy prices caused by the conflict between Russia and Ukraine. High gas prices are driving more and more manufacturers and service providers into the red. Unlike France’s caps that limit energy suppliers’ charges to end users, Germany’s price caps would tax generators who charge more than a certain amount, officials said. The funds are then distributed to network operators who sell energy to end users, enabling them to lower prices.
S&P slashes Italian growth forecast for 2023
S&P raised its forecast for Italy’s GDP in 2022 by 0.3 percentage points to 3.4 percent, but lowered its 2023 economic growth to a negative 0.1 percent from a positive 2.1 percent. In addition, S&P sees a sharp slowdown in economic growth across the euro zone on the verge of an unprecedented deterioration in terms of trade, inflation rising to record levels and confidence at historically low levels.
Sterling implied options volatility hits new high since Brexit in mid-2016
Three-month implied options volatility in sterling hit an intraday high of 19.785% on Monday, the highest since the Brexit referendum result in late June 2016, when volatility exceeded 22%, the data showed. Earlier in the day, GBP/USD fell more than 5% to a low of 1.0372, the lowest level since the pair fell below 2.00 in the early 1970s. At present, the pound has recovered to around 1.0851, which is one of the most volatile trading days in many years.
EU countries plan to delay implementation of Russian oil price cap
EU countries are working to reach a deal on a price cap on Russian oil, but that deal is likely to be delayed until a broader sanctions package is agreed. Countries such as Cyprus and Hungary have opposed the proposed oil price cap, according to sources. The European Commission met with member states over the weekend to try to find a compromise on a package of restrictive measures. Countries are likely to push for a tentative deal ahead of an informal meeting of EU leaders in Prague on October 6.