Dollar is rising after U. S. stocks
2023.01.03 14:23
Dollar is rising after U. S. stocks
Budrigannews.com – In a macro-packed week that could provide a guide on when and where U.S. interest rates might peak, U.S. stocks bucked a global equities rally, and the dollar rose on Tuesday as oil prices fell.
U.S. stock losses pushed down the MSCI All-World index by 0.5%. They lost 0.64 percent, 0.9 percent, and 1.3 percent, respectively.
The electric vehicle manufacturer Tesla (NASDAQ:) fell 14.7%, leading to losses in U.S. stocks. after it missed quarterly delivery estimates from Wall Street. Apple Inc., maker of the iPhone (NASDAQ:), following a rating downgrade as a result of China’s production cuts, it fell 4.3% to its lowest level since June 2021.
The expectation that the minutes of the Federal Reserve’s most recent meeting will signal additional policy tightening will lead to a strengthening of the US dollar ahead of their release on Wednesday.
Oil prices were hammered by a stronger dollar and worries about a slowing global economy, particularly after data showed that factory activity in China fell in December.
“We anticipate that the December FOMC minutes will provide additional insight into Fed officials’ 2023 policy perspectives. “Note that the Committee signaled broad expectations for a substantially higher terminal rate this year at the meeting,” said a note from analysts at TD Securities.
The rose by 0.97 percent to 104.66 [ USD/] After German regional inflation data showed that consumer price pressures eased sharply in December, thanks in large part to government measures to contain bills for households and businesses, the euro was the currency that performed the worst against the dollar, falling by the most since late September.
This week’s payroll data is expected to show that the labor market is still tight, and as energy prices fall, consumer prices in the EU may show some slowing of inflation.
According to a note from analysts at NatWest Markets, “stickiness in core components, much of this stemming from tight labor markets, will prevent an early dovish policy ‘pivot’ by central banks.” Energy base effects will result in a sizeable reduction in inflation in the major economies by 2023.
They anticipate that annual interest rates will peak at 5% in the United States, 2.25 percent in the European Union, and 4.5 percent in Britain. On the other hand, markets are anticipating rate cuts toward the end of 2023, with fed fund futures predicting a range of 4.25 percent to 4.5 percent by December.
Kallum Pickering, a senior economist at Berenberg, stated, “The thing that makes me nervous about this year is that we still do not know the full impact of the very significant monetary tightening that’s taken place across the advanced world.”
He stated, “The full effect takes a good year, or 18 months.”
Even though consumers have struggled to keep up with the skyrocketing cost of living and businesses are running out of room to protect their profitability by raising their own prices, central banks have expressed concern about rising wages.
However, Pickering stated that the labor market typically lags the economy as a whole by some time. As a result, there is a possibility that central banks could raise interest rates more than the economy can handle.
“Essentially, what central banks are inducing is excess cyclicality, which means that in 2021, they overstimulated and sparked an inflationary boom, and in 2022, they overtightened and sparked a disinflationary recession. He stated, “It is precisely the opposite of what you want central banks to do.”
European shares rose on the markets as a result of gains in traditional defensive industries like healthcare and food and beverage. Novo Nordisk, a drugmaker (NYSE:), (LON:) Astrazeneca Along with Nestle, Roche and Nestle were among the largest positive weights on the The STOXX, which lost 13% in 2022, rose 1.2 percent. The only major European index that did not trade on Monday was the, which gained 1.4%.
Markets had priced in a possible U.S. easing for some time, but the Bank of Japan’s sudden increase in its ceiling for bond yields seriously misled them.
According to the, the BOJ is now considering raising its January inflation forecasts to show price growth close to its 2% target in fiscal 2023 and 2024.
The possibility of an end to ultra-loose policy, which has essentially served as a floor for bond yields worldwide, would only grow if such a move were made at its next policy meeting on January 17-18.
The dollar lost 5% in December and the euro gained 2.3% as a result of the policy change.
On Tuesday, the yen took a break, falling 0.4% against the dollar to 130.69. Earlier, the dollar was at a six-month low of 129.52 yen.
Oil fell as a result of the strength of the dollar and worries about demand in China, the world’s second-largest economy.
As COVID infections spread through production lines, a series of surveys have revealed that China’s factory activity decreased at its fastest rate in nearly three years.
Capital Economics’ analysts issued the following warning: “China is entering the most dangerous weeks of the pandemic.”
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