The super dollar – especially against the pound, the euro and the yen – scares the markets. Wall Street opens the week in negative territory. At about 3.45 pm Italian time, the Dow Jones loses almost 140 points (-0.49%), the S&P 500 falls by 0.19%, while the Nasdaq is recovering with a rise of 0.46%.
“Historically, such dollar strength always translates into a sort of financial and economic crisis,” Michael Wilson, chief strategist of Morgan Stanley’s equity division, wrote in a note reported by CNBC.
The pound is actually recovering ground now, in the wake of some rumors that the Bank of England is ready to intervene on the currency with an emergency meeting, to be precise with a new rate hike.
The UK case seems to worry traders more than
victory of the center-right in the Italian political elections.
The outcome of the elections inaugurates the era of a very probable Meloni government.
Known for having often raised her voice against the European Union and its rules, the leader of the Brothers of Italy is now moderate, which is why it is more UK Gilt government bonds than BTPs that are harassed.
In fact, 10-year BTP yields jumped by +29.4 basis points, up to 4.12%, against a rise in ten-year BTP rates which was limited to +9 basis points at 4.43%.
The monstrous plan of tax cuts signed by the British government of Liz Truss continues to put under pressure on assets made in the UK so that, during the trading of the Asian markets, the pound has collapsed by almost -4%, testing a new all-time low against of the US dollar, at $ 1.0382, before gaining height, but aiming down again and canceling much of the recovery. The euro lost 0.26% to 0.9664.
The upward march of US Treasury yields also continues: two-year US government bond rates, those most sensitive to the Fed’s monetary policy decisions, have now flown over 4.3%, up to 4.351%, in value. higher since August 2007. 10-year Treasury rates also rose, increasing by 9 basis points to 3.789%.
The US stock market is therefore still negative, after the umpteenth closing down on Wall Street last Friday, which saw the Dow Jones capitulate by 486 points to the new intraday low of the year, losing 1.62%, to 29,590, 41 points; the Nasdaq slipped 1.8% to 10,867.93 and the S&P 500 also hit the lows since June with a 1.72% loss to 3,693.23.
The Dow Jones closed below the 30,000 point mark for the first time since June 17, returning to flirt with the bear market, as it fell 19.9% from its intraday record. At one point in last Friday’s session, where the dominant theme was the announcement of Liz Truss’s UK government shock tax cut plan, the Dow Jones capitulated by 826 points.
The US stock market ended its fifth negative week of the past six, with the Dow Jones losing 4% during the week, and the S&P 500 and Nasdaq down 4.65% and 5.07% respectively.
The fear of rates is still the protagonist on Wall Street after last week the Fed led by Jerome Powell carried out its third consecutive monetary tightening of 75 basis points, bringing US fed funds rates to a record since 2008, in the range between 3 % and 3.25%, with the aim of stopping galloping inflation.