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Stock markets were unable to hold onto gains

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 novembre 2022
After a promising start, the US stock markets headed towards negative territory, ending the trading day on the losing side.

Tech100 pierced the 200-day simple moving average for the first time in years, trading below the important technical reference level of 15,000.

The collapse of some stocks is best reflected in the performance of Peloton, which lost almost 25% on the day after announcing that it was temporarily stopping production.

Omicron invades China once more

One of the major influencing factors for the market’s increased risk aversion is the epidemiological situation in China. The Asian country recorded a growing number of Omicron infections, and as a consequence, the Government adopted new lockdown measures. The Bank of China, against the general trend of other central banks, decided to cut the reference rates for mortgages, a measure taken to combat the slowdown in its economy and support the real estate sector.

To add fuel to the fire, the Federal Reserve’s imminent restrictive monetary policy changes impact the already troubled financial markets.

Geopolitical tensions surrounding Ukraine

And as if that were not enough, the geopolitical tension is reaching new intensity levels after President Biden acknowledged that a Russian invasion in Ukraine is highly probable, with all the consequences that an event of this caliber can bring.

The 10-year US treasury bond yield fell four basis points yesterday, probably due to flows in search of safe-haven assets. For this reason, impulsive gold purchases flooded the markets, spreading to other precious metals such as platinum or palladium and even oil, whose upward trend can be attributed to fears of a geopolitical conflict.

The US Dollar pushed lower

The slight decline in Treasury bond yields pushed the US dollar lower against most of its peers, except the Euro. The ECB president Lagarde ruled out any intention of raising rates, putting downward pressure on the Euro. Moreover,  the CPI figure for the eurozone, still at acceptable levels of 2.5% year-on-year, reinforced ECB’s decision.

EUR/USD fell almost 40 pips yesterday, approaching the 1.1275 area below which the bullish momentum started at the end of November would come to an end.

Sources: Bloomberg, Reuters.

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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel ha lavorato per importanti istituzioni finanziarie, come Banco Santander e Banco Central-Hispano. È autore di libri sul trading di valuta con diverse pubblicazioni alle spalle.