On Thursday, stocks fell to a 1.5-year low, at the same time the dollar jumped above its head. Such a level has not been observed for about 20 years.
The reason for this is a sharp increase in rates to counter the steadily rising inflation, which in the end may well lead to the collapse of the global economy.
There is no end in sight to the war in Ukraine, sanctions are gaining momentum, threatening a global economic crisis, especially in Europe, which leads to the fact that the main markets of Europe (EU) fell by more than 2%, and MSCI (the broadest index of MSCI stocks in Asia – Pacific region) collapsed by almost 20% over the year.
The Dow Jones (DJI) closed down 1.02% to 31,834.11, the S&P 500 (SPX) fell 1.7% to 3,935.18 and the Nasdaq (IXIC) fell 3.18% up to 11.364.236 points.
China, still in lockdown: 41 Chinese cities are in full or partial lockdown, which is 30% of the country’s GDP.
The Chinese Yuan dived to a 19-month low of 6.7631 and fell nearly 6% in less than a month.
Hong Kong’s Hang Seng Tech index was down 1.5% on Thursday and has fallen more than 30% this year.
Also, the Australian and New Zealand dollars fell by 0.8%, to almost a two-year low price, although the euro and yen remained stable, so the dollar index almost reached a 20-year high.
The pound sterling hit a 2-year low near $1.22 as worries mount that Britain’s Brexit deal with the EU may fail again over the old Northern Ireland border issue.
The American dollar has recorded a record rise in price since 2002.
Consumer prices in the US rose by 8.3% in April compared to April last year, which was higher than expert forecasts by 8.1%.
“The market is trying to see if we will also see a stronger pullback than expected (when the Fed raises rates)” – said Quincy Crosby of LPL Financial.
The rate outlook is helping the US dollar rise while at the same time contributing to the collapse of riskier assets, which have seen sharp gains in two years of stimulus and low-rate lending.
Treasury bonds were in demand in both Europe and Asia, especially long-term ones, flattening the yield curve as investors looked to hike rates in the short term to derail long-term growth, which could eventually slow down rate hikes.
The benchmark 10-year US Treasury yield continued to fall 7 basis points to 2.8569% on Thursday. The gap between the yields of 2-year and 10-year bonds, dependent on the increase in rates, narrowed by 4.2 bp.
In Europe, Germany’s 10-year yield, the bloc’s benchmark, slipped 12 basis points to 0.875%, hitting a two-week low.
“When the market goes down, it tends to go down quite quickly,” Caroline Simmons, chief investment officer at UBS UK, commented on the bond market.
Shares of Apple (AAPL) fell 5.2% and put the most pressure on the Nasdaq and S&P 500 indices.
Coinbase Global Inc (COIN) fell 26.4% as the cryptocurrency exchange’s first-quarter earnings fell short of expectations. The company also posted a loss as worrisome developments in global markets dampened investor interest in riskier assets, including cryptocurrencies.
Cryptocurrency markets are in a downturn: the collapse of the TerraUSD Stablecoin is to blame, as well as the sale of Bitcoin and the second largest crypto Ethereum.
Bitcoin, trying to counter the sell-off of risky cryptocurrencies, still collapsed another 8% to $26,570 showing a record decline of almost 33% in a week from $40,000. In total, since November last year, Bitcoin has lost more than half of its value (about 60%) going down from $70,000.
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