Article Hero

The financial markets under siege, risk sentiment worsens - Market Overview

1627985851.png
Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The Purchasing Managers' Index data published yesterday in the U.S. confirms the global slowdown in economic growth. In such a scenario, the market risk sentiment deteriorates rapidly.

The COVID-19 delta variant keeps affecting the global economies with supply chains not working efficiently, resulting in a negative impact on the manufacturing industry. Despite all this, certain Fed members still argue that the U.S Central Bank could start withdrawing monetary stimulus as soon as September. However, this opinion is not widespread amongst the bank’s officials, with most of them believing in an accommodative monetary policy.

The debate is broad, while uncertainty continues to dominate the market. Most financial assets (including U.S. Treasury Bonds) are opting for a more risk-averse stance.

For example, the 10-year benchmark Tnote bond recorded the lowest yield since the beginning of the year: 1.18%. The bond continues to be widely bought due to its safe-haven role during times of risk aversion.

The stock indices are still trading in the upper part of their last price in a lateral movement, alternating days of rises and falls, despite earnings reports exceeding expectations. On the other hand, it is also true that some of the large companies have revealed less optimistic expectations for the upcoming quarters.

This pessimistic market sentiment is being reflected more directly in the foreign exchange market, more specifically in the Japanese yen, which also acts as a safe-haven currency.

The USD/JPY has lost ground throughout July, reaching its lowest levels in early August. From a technical analysis point of view, the pair is forming a head-shoulder pattern which would activate with a daily close below the level of 109.20, where it is at the moment. Its theoretical projection would be around 106.80, through which the 100-day SMA line currently passes.

Similar patterns are forming on other yen crosses such as the EUR/JPY and CAD /JPY.

No relevant economic figures are set for today; only earnings from important companies such as Alibaba or the Marriot hotel chain will be released. The Japanese fx markets are looking forward to the American employment figure that may set the tone for what to expect next.

Sources: Bloomberg, reuters.com.

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. 

Share this article

How did you find this article?

Awful
Ok
Great
Awesome

Read More

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.