Equities Worldwide Sway as Recession Fears Raised by US Data
On Wednesday, stock markets throughout the world fluctuated as investors focused on worries about the US economy and a significant interest rate hike in New Zealand.
During a week with fewer trading days due to holidays, London increased while Frankfurt and Paris declined.
Following losses on Wall Street, Asian markets wavered as data indicating a softness in the US labor market suggested a slowdown in the largest economy in the world.
Oil fell after rising earlier this week as a result of unexpected output reductions from OPEC+ petroleum producers.
According to Richard Hunter, the director of markets at trading company Interactive Investor, “markets are sliding as investor thoughts start to turn onto a level of severity (recession), as the likelihood of an economic downturn later in the fiscal year in the US increases.”
Rates of New Zealand lift
On Wednesday, the central bank of New Zealand raised interest rates substantially to combat the country’s skyrocketing inflation.
The Reserve Bank of New Zealand increased its interest rate to 5.25 percent by a larger-than-expected 50 basis points.
Hunter told AFP that central banks are now split on whether inflation has peaked and whether to apply the tightening brakes.
The market consensus is currently equally divided between the US Federal Reserve taking a final 0.25 percentage point raise or taking no action at all, which is contrary to the Australian decision to stay put.
Markets have enjoyed a few good weeks since the crisis in the banking industry in March thanks to hopes that the Fed may scale back interest rate increases sooner than anticipated.
At the beginning of this week, the surge persisted even after unexpected cuts in oil production by significant producers sent prices rising and rekindled concerns about inflation, which had been declining in recent months.
However, as data revealed that February job vacancies at US corporations dropped to their lowest level (recession) since May 2021 and fell short of estimates, New York traders began to sell on Tuesday.
Analysts said the result was also considered as an indication that the economy was on the decline (recession), even if figures showing a solid labor market have been welcomed as allowing the Fed room to cease rising rates.
Gold glistens
One day after crossing $2,000 per ounce, the price of gold, which is seen as a safe investment in uncertain economic times, increased toward a record high on Wednesday.
The price of gold increased to $2,028.44, a level last reached in early 2022, and not far from the record $2,075.47 established in August 2020.
Given uncertainties regarding US economic projections, investors turned to gold as a safe-haven investment, according to TickMill Group analyst Patrick Munnelly.
Fed In order for the Fed to regulate (recession) inflation, rates must rise above the current five percent, Cleveland’s head Loretta Mester said.
That message was delivered in spite of concerns regarding the banking industry, which were raised last month with the failure of three regional US banks and the emergency takeover of Credit Suisse by Swiss rival UBS.
Jamie Dimon, the CEO of JPMorgan Chase, shocked investors by stating that the recession financial crisis “is not yet over” and that high inflation could continue for some time to come, prolonging the time period of higher interest rates.
UBS executives told shareholders in Basel on Wednesday that buying Credit Suisse was a “Herculean task” fraught with danger but ultimately the correct one.
Check out Important information at 1100 GMT on April 5, 2023
London – FTSE 100: UP 0.4 percent at 7,665.17 points
Paris – CAC 40: DOWN 0.2 percent at 7,329.72
Frankfurt – DAX: DOWN 0.4 percent at 15,549.40
EURO STOXX 50: DOWN 0.2 percent at 4,304.91
Tokyo – Nikkei 225: DOWN 1.7 percent at 27,813.26 (close)
Hong Kong – Hang Seng Index: Closed for holiday
Shanghai – Composite: Closed for holiday
New York – Dow: DOWN 0.6 percent at 33,402.38 (close)
Euro/dollar: DOWN at $1.0952 from $1.0953 on Tuesday
Pound/dollar: DOWN at $1.2481 from $1.2501
Euro/pound: UP at 87.75 pence at 87.62 pence
Dollar/yen: DOWN at 131.64 yen from 131.71 yen
Brent North Sea crude: DOWN 0.3 percent at $84.70 per barrel
West Texas Intermediate: DOWN 0.5 percent at $80.32 per barrel
