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Uncertainty still looms large, as Asian markets get hit hard – Market Overview

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The Asian stock markets have suffered setbacks, with fears of a bubble forming in China’s markets causing abrupt falls of around 1% for Japan’s and China’s indices.

In Europe, ECB Vice President De Guindos has stated their intention to act by increasing the amounts of their asset purchase program should long-term interest rates suffer an upward process, jeopardizing the financing facilities they seek with their monetary policy. He has also commented that the ECB fears an inflationary process in the United States that could affect European treasury bonds. In a way, it seems the European Central Bank blames the United States for market instability. And somehow, this could be true, considering the difference in inflation in the United States and Europe and, above all, the inflationary expectations that have soared in North America.

Interestingly, the $1.9 trillion fiscal stimulus package pending approval by the Senate is now being perceived as a potential future cause of an inflationary process that could cause interest rate hikes and stop the bullish stock market.

Bonds stabilize, North American indices plunge.

For now, the fixed income market seems to have stabilized at previous levels, with a yield for the 10-year American bond at around 1.43%.

However, the North American indices started in the red, led by TECH100 that fell around 1% but still far from the support level located at 12,691 and whose loss would end the last uptrend, from a technical point of view.

F.X. market - the U.S. Dollar gains.

In the foreign exchange market, the U.S. dollar is the currency that benefits from this situation due to the rise in long-term interest rates and risk aversion.

At the beginning of the day, the U.S. Dollar rose against all its competitors, including the yen, especially against the euro.

Following De Guindos' comments, the EUR/USD went below the 100-day SMA line, breaking the 1.2000 psychological level.

If the pair closes in this range, it could open the way towards the main support of 1.1950, below which the market could begin talking of a change in the pair's trend.

Also contributing to this movement was the publication of negative data on retail sales in Germany, showing a drop of -4.5% in January, well below expectations.

Sources: Bloomberg, Reuters.

The information presented herein is prepared by capex.com/ae and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only.Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience, or current financial situation. 

Key Way Markets Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance and forecasts are not reliable indicators of future results.

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.