20/05/2022 16:12
Want to buy on Wall Street, after yet another week of declines. Today the positive sentiment is explained by the rate cut in China: at around 4 pm Italian time the Dow Jones rises by more than 150 points (+ 0.50%), to 31,402 points. The S&P 500 advanced 0.74% to 3,928, while the Nasdaq advanced 0.90% to 11,484.
Focus on the US dollar, which is about to close lower for the first of the last seven weeks, and also to conclude the worst week since the beginning of February.
Reason: the sharp turnaround in US Treasury rates (in a few days from a value close to 3.2% to 2.83%), which makes dollar-denominated assets less attractive. And so, after the 10% jump of the last two weeks, the Dollar Index is preparing to close the week down by 1.5% at 102.96, in the face of the comeback of the Eurom which is explained by the decidedly tones. more hawkish than the ECB by Christine Lagarde.
At around 1.40 pm Italian time, futures on the Dow Jones are up 0.80%, those on the S&P 500 are up 1.02% and those on the Nasdaq are up by around 1.4%.
The meeting of the G7 finance ministers ended with a statement in which the need to monitor the markets due to the recent volatility was reiterated, and in which the commitment on exchange rates was also reaffirmed.
Japan’s concerns over the sharp weakening of the yen against the dollar acknowledged.
The ministers reiterated that it is the markets that must establish the exchange rates, but that the G7 will still coordinate on the movements of the currencies, to avoid that too violent movements end up affecting growth.
Today the People’s Bank of China – the central bank of China – announced its decision to confirm the one-year loan prime rate (LPR) at 3.7%, instead cutting the five-year rate from 4.6% to 4.45%. The reduction, equal to 15 basis points, is the strongest since 2019.
LPR rates are the benchmark lending rates that are set monthly by 18 Chinese banks. The expansionary move clearly reflects the intention of the Chinese central bank to intervene in support of the country’s economy which, according to economists, will suffer a contraction in the current quarter, due to the lockdown measures that the Beijing government has launched to counter the recent wave of Covid-19, as part of its zero Covid
policy.
The intervention of the People’s Bank of China, which among other things said it was ready to launch new expansive monetary policy measures, triggered the buy on Asian stock exchanges.
But the weekly budget in the case of Wall Street is definitely in the red.
The Dow Jones is preparing to end the week down 2.8%, with a negative trend for the eighth consecutive week, the longest bearish phase since 1932. The S&P 500 and Nasdaq are oriented to close the seventh consecutive week down, with the S&P 500 down 19% from the previous record tested in early January.
If the losses reach -20%, the benchmark index will slide into bear market for the first time since March 2020, the month in which the Covid pandemic alert rang out worldwide.
Yesterday the S&P 500 fell 0.58% to 3,900.79, while the Dow Jones Industrial Average lost 236.94 points (-0.75%), 31,253.13. The Nasdaq Composite lost 0.26% to 11,388.50.