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Rate hike fears persist

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Wall Street's main indices started higher yesterday as growth and technology stocks rallied after a three-day slide driven by fears of aggressive interest rate hikes

The last day of the month is not usually a very important date in market analysis since there are portfolio adjustment flows that do not correspond to fundamental factors. However, yesterday the weaker-than-expected ADP data was published and, along with a drop in oil prices, had a positive effect on the market, helping alleviate some concerns about inflation.

 

The national employment report from ADP showed that private payrolls increased by 132,000 jobs in August, below economists' forecast for job growth of 288,000.

Yet yesterday was extremely volatile, with continual ups and downs and no clear direction for most assets.

 

Today, the first day of September, the ISM manufacturing PMI data for August will be published. Given the current circumstances in which the Federal Reserve has its sights set on the evolution of the US economy and inflation, the leading indicator will have relevance to the market performance. In this case, just like what may happen with tomorrow's NFP number, a weak figure could push back expectations of rate hikes and therefore be welcomed by stock markets. Paradoxically, negative data are viewed positively by the market.

 

The most volatile movements in the market yesterday were in the foreign exchange one, as usually happens at the end of the month because of the rebalancing of fund portfolios.

 

The EUR/USD pair, which had remained under pressure throughout the day around parity, even after a high European inflation figure was published, experienced a strong buying impulse. Around 17:00 CEST, the pair traded at 1.0080, a full figure higher than where it was trading midday in Europe with no positive Euro news to justify the move. This marked a clear example of the volatility at the end of the month. 

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Sources: Bloomberg, reuters

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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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.