Stock indices continue to fall due to recession worries

The US stock market fell on Monday for the fourth straight session as investors fear that the Federal Reserve's campaign to tighten monetary policy could push the US economy into recession. This sentiment is creating downward pressure on major indices. At the stock market's close, Dow Jones (US30) decreased by 0.49%, while S&P 500 (US500) fell by 0.90%. The Technology Index NASDAQ (US100) was down by 1.49% on Monday. All three indices closed the day lower.

Stock markets in Europe mostly rose yesterday. German DAX (DE30) gained 0.36%, French CAC 40 (FR40) added 0.32%, Spanish IBEX 35 (ES35) increased by 0.30%, and British FTSE 100 (UK100) closed on Monday plus 0.40%.

Germany may avoid a recession this winter. The fiscal stimulus packages implemented by the government have prevented the economy from falling off a cliff. But at the same time, the cold winter of the last few days has shown how quickly the nation's replenished gas reserves could disappear again. Today, many official forecasts suggest that the German economy will return to its average quarterly growth rate by mid-2023.

Oil prices rose Monday as optimism over China's easing COVID-19 restrictions outweighed fears of a global recession affecting energy demand. Oil also received support from the US Department of Energy, which said Friday it would begin buying crude for the Strategic Petroleum Reserve.

European Union energy ministers on Monday agreed to limit gas prices as the EU aims to tackle the energy crisis. The restriction could be imposed starting February 15, 2023. Germany voted to support the deal despite expressing concerns about the policy's impact on Europe's ability to attract gas supplies. Ministers agreed to impose a cap if prices exceed 180 euros per megawatt hour for three days on the contract for the coming month with the Dutch gas transmission center (TTF), which serves as the European benchmark. The Intercontinental Exchange ICE, which trades the TTF on its exchange in Amsterdam, said last week that it might move TTF trading outside the EU if the bloc caps prices.

Asian markets were mostly down yesterday. Japan's Nikkei 225 (JP225) decreased by 1.05%, China's FTSE China A50 (CHA50) fell by 0.33%, Hong Kong's Hang Seng (HK50) ended the day down by 0.50%, India's NIFTY 50 (IND50) rose by 0.83%, and Australia's S&P/ASX 200 (AU200) ended Monday in minus 0.18%.

The Bank of Japan shocked markets Tuesday by doubling the 10-year bond yield cap, causing the yen to spike and government bonds to fall, helping pave the way for a possible policy normalization. The Bank of Japan will now allow Japan's 10-year bond yield to rise to about 0.5%, up from the previous limit of 0.25%. The Central Bank said the move would enhance the sustainability of its monetary easing, but many economists interpreted the move as laying a preliminary foundation for an exit from a decade of extraordinary stimulus policies.

In Australia, the minutes of the November monetary policy meeting showed that the Australian economy continues to grow steadily. However, economic growth is expected to slow next year. The council expects further interest rate increases in the coming period. The size and timing of future interest rate increases will continue to be determined by incoming data and the Board's assessment of inflation and labor market prospects.

S&P 500 (F) (US500) 3,817.66 −34.70 (−0.90%)

Dow Jones (US30) 32,757.54 −162.92 (−0.49%)

DAX (DE40) 13,942.87 +49.80 (+0.36%)

FTSE 100 (UK100) 7,361.31 +29.19 (+0.40%)

USD Index 104.35 -0.45 (-0.43%)

• – Australia RBA Meeting Minutes (m/m) at 02:30 (GMT+2);
• – China PBoC Loan Prime Rate at 03:15 (GMT+2);
• – Japan BoJ Interest Rate Decision at 05:00 (GMT+2);
• – Japan BoJ Monetary Policy Statement at 05:00 (GMT+2);
• – Japan BoJ Press Conference at 05:00 (GMT+2);
• – US Building Permits (m/m) at 15:30 (GMT+2);
• – Canada Retail Sales (m/m) at 15:30 (GMT+2).

by JustMarkets, 2022.12.20

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.