Markets have been volatile lately, but investors have been propping them up with periodic rallies to acquire previously downtrodden stocks at low prices.
On Friday, investors in a sell market driven by stringent economic policies and fears received a little reprieve as the S&P opened higher and is now set to reverse 3 weeks of straight losses.
This year’s widespread decrease in stock prices may be attributed to the Federal Reserve’s decision to raise interest rates to curb inflation. Since the summer’s beginning, however, the market has seen intermittent rises as dealers and purchasers acquire low-priced stocks.
However, some traders and analysts predict more volatility soon. All major central banks, including the Fed, the Bank of England, and the European Central Bank, are reportedly committed to lowering inflation at whatever cost. In addition, the global economy faces additional risks from China’s Covid-19 shutdown and Europe’s energy crises.
“We have this long-running, learned, Pavlovian response that when demand starts to wane or stocks prices are declining,” says Richard McGuire, rates strategy director at Rabobank. “We have conditioned ourselves for central banks to fill the punch bowl for investors.”
At noon, when Federal Reserve Governor Christopher Waller speaks on the economy at 2:00 p.m. ET today, investors will be listening attentively for clues about the direction of monetary policy in the future. Based on CME Group projections, investors expect the Fed to raise interest rates by 0.375 percentage points at its end-of-the-month meeting.
The dollar has reversed its upward trend as increased oil prices and Japan’s dovish monetary policy have been felt in European currencies and the Japanese yen, respectively.
While there was a little increase in oil prices, it wasn’t enough to offset the weekly decline. As the global economy slows, concerns about decreased gasoline consumption have led to a fall in Brent oil prices in recent trading sessions.
Bond yields decreased because prices rose. U.S. 10-year bond yield The benchmark 10-year U.S. Treasuries yield fell to 3.255% on Friday, from 3.291% the day before.
Stock markets elsewhere saw gains. The Stoxx Europe 600 index rose by 1.6%, led by a rise in basic-resource and financial-sector stocks.
Hong Kong investors sent the Hang Seng index jumping by 2.7% after China’s August inflation statistics came in lower than anticipated. The CSI 300 index in China rose by 1.4%, with significant contributions from the healthcare and real estate sectors.
Consumer prices in China increased 2.5% in August compared to the same month a year earlier, lower than the 2.7% rise in July, according to the National Bureau of Statistics of China. The slowdown in inflation is encouraging news for policymakers working to stimulate the economy in the face of other challenges, such as the downturn in the property market.