European stocks may have adjusted their bearish course on Tuesday after violent declines, and US index futures may be swinging near yesterday’s levels in an attempt to correct the course.
However, one of the most important reasons for the violent declines sweeping the markets is still present, and warning signs are rising about the possibility of an imminent recession that may strike the major economies, starting with the US economy. Today, the markets are awaiting the announcement of the minutes of the last meeting of the Federal Reserve, following any signs about the development of monetary policy.
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The dollar is on top
On the other hand, the dollar rose again, surpassing the top of 20, as the main dollar index rose to levels near 107 points, an increase of 0.2% against a basket of major currencies.
On the other hand, the euro fell to its lowest level against the US dollar in 20 years, reaching levels of $1.02 / euro, while the yen fell 0.3%, extending its losses below the lowest level ever against the dollar.
While gold turned to the downside again after violent declines during yesterday’s session, during which it lost nearly $37, down by 2%.
And gold fell during these moments from Wednesday’s trading in the range of 0.2%, or the equivalent of $3 an ounce, down to levels near $1,760 an ounce, to its lowest level from September 2021.
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During these moments, the yield on the two-year US Treasury bonds recorded 2.849%, while the yield on the 10-year US Treasury bonds came at 2.82%.
And the two-year bond yields recorded yesterday, Tuesday, at 2.8082%, while the 10-year bond yield recorded 2.793%, and market experts believe that this is an inversion of the yield curve, which gives strong signs of recession.
The yield curve inverts or inverts when the yield on shorter-dated bonds becomes higher than the yield on longer-term bonds, which economists view as a warning of an expected recession within a year or two.
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“There is now investor sentiment in full swing and it is hard to ignore, given the inverted yield curve and the 10-year bond yield falling below 3%,” said Ian Laingage, president of BMO.
The BMO chief added: “I’m not saying this is a direct sign of recession in the near term, but this is consistent with the increase in recession fears.”
In early April, the two-year US Treasury yield rose by more than 13 basis points to 2.47%, surpassing the 30-year yield for the first time since 2007, and further away from the 10-year yield.
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Again, Credit Suisse lowered the target for the S&P 500 index of US stocks in conjunction with the stock market’s record losses in the past weeks.
Credit Suisse said in a recent note that the target for the S&P 500 was lowered to 4,300 points, compared to estimates issued at the end of last year of 4,900 points.
Last December, Credit Suisse expected the S&P 500 index to reach the level of 5200 points due to optimistic expectations about economic growth, but later lowered its estimates.
Credit Suisse analysts said that our target for the index has been lowered to reflect an increase in the cost of capital over valuations rather than recession fears. In contrast, Credit Suisse analysts argue that despite the fact that economic growth is currently slowing from previous highs, the situation does not represent a recession.
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European indices rose during these moments of trading on Wednesday, with the British FTSE index ignoring the resignation crisis sweeping the Boris Johnson government, rising by 1.6 percent, or 114 points.
While the German DAX index rose 1.5%, or the equivalent of 180 points, while the French CAC index rose 1.7%, or the equivalent of 100 points, while the Euro SOX 600 composite index rose by 1.5%.
By the end of Tuesday’s session, the European Stoxx 600 index fell by 2.1%, or 8 points, the British FTSE 100 (LON:LSEG) fell 2.9%, the German DAX fell by 2.9%, and the French CAC fell 2.7%.
The decline in stock indices coincided with the euro’s decline to its lowest level in two decades, amid fears of a recession in the eurozone economies, while the Bank of England warned that the global economic outlook has deteriorated significantly, due to the rise in commodity prices, which pushed inflation to accelerate.
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In contrast to the European indices’ rise, the Wall Street indices started with an uncertain start in the pre-trading period, which hovered near Tuesday’s levels.
The Dow Jones, Standard & Poor’s 500 and Nasdaq indices rose during these moments from pre-trading on Wednesday by less than 0.1%.
On the other hand, the Dow Jones index fell on Tuesday by 0.42% after violent losses that exceeded 600 points, while the Standard & Poor’s and Nasdaq indices succeeded in turning to the upside after the violent fall.
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Violent fluctuations.. coins in the abyss and dollars in the sky