Prospects of a continuous. aggressive monetary policy by the Fed, the troubled Chinese property market, a power crunch and Covid 19 mobility curbs make up some major markets forces for today, Monday. Among other market movements, the U.S. dollar rose while global stock markets dropped.
Global Stock markets
The recent rise in global shares following June’s market lows has begun to retreat after Fed officials’ statements pointed to more interest rate hikes. Also, challenging economic developments around the globe including power cuts in a Chinese industrial hub have spread worry among investors.
The Fed’s Symposium
The Fed’s symposium is slated to commence this Thursday at Jackson Hole, Wyoming and it’s key for markets as Fed Chair Jerome Powell will be addressing the annual global central banking conference on Friday. Investors will be looking for clues regarding the Fed’s next steps.
China Economy News
In China, the national central bank cut its benchmark lending rate and lowered the mortgage reference by a higher margin on Monday. This led banks to lower the one-year and five-year loan prime rates as the Chinese economy is hit by a property crisis and mobility curbs due to rising Covid cases in addition to a power crunch in Sichuan province, a major industrial hub.
U.S. dollar hits new highs
The U.S. dollar reached a new five-week high against major currencies today, Monday. Investors are turning to the largest global economy’s currency after more Fed officials keep pointing to the possibility of an extended aggressive monetary tightening.
The Euro Drops
The Eurozone currency fell to a new five-week low after Russia’s announcement that the European gas supplies from the Nord Stream 1 pipeline will be cut for three days at the end of this month intensifying the area’s energy crisis.
Chinese Yuan Hits 2-year low
China’s yuan fell to levels last seen two years ago after the national central bank lowered key lending rates. The measure comes as part of a group of monetary easing measures intended to help an economy hit by Covid-19 mobility curbs and a property crisis.
Gold loses safe-haven appeal to U.S. dollar
Gold prices dropped further on Monday due to the persistent uncertainty over the Federal Reserve’s monetary policy. The probability of hiking U.S. interest rates has allowed the U.S. dollar to extensively overtake gold as a safe haven during 2022 in spite of the precious metal gaining traction during the onset of the conflict between Russia and Ukraine.
Oil drops after 3-day gains
Oil prices dropped today, Monday, putting an end to three days of increases. The fall comes due to concerns that further U.S. interest rate hikes will weaken the global economy and hit fuel demand while the strong U.S. dollar added to the pressure. The prices also dropped on worries for lower fuel demand from China due to a power crunch.
What to Watch out for this Week:
U.S. new home sales
S&P Global PMIs
Fed’s Neel Kashkari’s speech
U.S. durable goods
U.S. MBA mortgage applications
U.S. pending home sales
U.S. initial jobless claims
Fed annual policy symposium
ECB’s July minutes
Fed Chair’s speech at Jackson Hole
U.S. consumer income
U.S. PCE deflator