Stock Market Drops, Intensified Geopolitical Tensions in Play

By: Miguel A. Rodriguez

11:49, 30 September 2022

Nasdaq technology lost more than 3% in the session after erasing all of the previous day's gains.

The calm in the markets did not last long. 

Stock indices rose for the first time in seven days as Treasury yields fell following the Bank of England's announcement that it would buy long-term British bonds to restore financial stability in the markets. 

However, the relief was short-lived, as sterling fell and bond prices fell on Thursday, with the asset sell-off spreading across all risk assets, albeit to a much lesser extent for bonds. US Treasury bonds and German bonds have the best risk ratings and are thus safe assets in the event of a crisis or an increase in investor risk aversion. 

On this occasion, the sale of stock indices that have resulted in significant drops in large North American technology companies. The sell-off was triggered not because of an increase in market interest rates, which have remained relatively stable, but by the rise in geopolitical tensions following serious incidents of "sabotage" in Baltic Sea gas pipelines and the declaration of the annexation of Ukraine's eastern territories following the holding of a referendum by Russia. However, Western countries do not hesitate to describe this referendum as fraudulent. 

The most serious is the promise of the United States to intervene directly in the conflict in case Russia declares the annexation of these territories. 

Many people believe that a major escalation in war is imminent, including the use of tactical nuclear weapons. All intelligence reports indicate that Russia is doing far more than "partial mobilization." 

To this ominous scenario, we must add the dates of the end of the month and the quarter, when high volatility movements in the markets are common due to changes in investment fund portfolios and do not usually have a fundamental explanation. 

The price dynamics in the foreign exchange and raw materials markets were somewhat more restrained, with the US dollar falling slightly. Still, the US stock indices suffered heavy losses, particularly the Nasdaq technology, which erased all of the previous day's gains and fell more than 3% in the session. 

Sources: Bloomberg, Reuters 

Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.