Wall Street lower on fears of an aggressive Fed

By: Miguel A. Rodriguez

10:48, 23 August 2022

The announcement of a new "maintenance" closure on the Nord Stream 1 pipeline was the catalyst for increased risk aversion in Europe

The European Natural Gas TTF price shot above 275 euros MWH, dragging with it the American future Henry Hub, which was quoted again at the latest highs of 9.70.


The fear of a lack of gas supply in Europe threatens the market. The consequences are felt directly in the financial markets and can lead Germany to a recession, as the country’s government has already warned.


The DAX index closed the European session more than 2% lower. The single currency is suffering from high selling pressure that has again taken the EUR/USD pair to levels below parity, a price not seen for twenty years.


The European Central Bank is facing a very complicated dilemma. On the one hand, it is forced to raise interest rates to end galloping inflation and stop the fall of the Euro, which is an inflationary factor. But on the other hand, it is faced with an economy on the verge of recession in some important European countries. The consensus among economists is that the ECB will opt for interest rate hikes, with a 50-bps increase expected for September, despite the extreme vulnerability of the European economy now.


US Market

The stock market weakness is also noticeable in the American indices. In this case, the causes are different. We are likely witnessing a technical correction after two months of continuous gains. Also, news of the Jackson Hole meeting is pending. Jerome Powell will probably give the market more information about the next interest rates.


Recently, market sentiment seems to have changed towards a somewhat more aggressive Federal Reserve because interest rates will remain high for a long time. This is because the economic data is not showing signs of weakness. Treasury bond yields have risen as a result, with the 10-year bond already close to 3%. It has also been a factor that has influenced the downward movement of the American stock markets in recent days.

GráficoDescripción generada automáticamente


Sources: Bloomberg.com, reuters.com

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.