Stock futures in the US have now dropped and global stocks are also looking at the lowest level in six weeks on Friday. Meanwhile, the US Dollar rose to a new high of about 24 years against the Japanese Yen as the market expects the US jobs report. Investors are also getting ready to receive another aggressive interest rate increment from the US Federal Reserve.
Worries from Chinese Lockdown
New COVID lockdowns imposed in China are equally spreading worries about global economic growth. The increasing cost of living and energy also adds to the list of concerns in Europe. This is a fallout of the ongoing war between Ukraine and Russia.
HYCM’s Head of Currency Analysis, Giles Coghlan, stated that the financial market has its full focus on the extent of the Federal Reserve’s aggressive monetary policy, as well as its increment cycle. He added that there are more expectations of a higher interest rate now than before Powell’s speech during the Jackson Hole conference.
Coghlan said further that the markets are concerned about slow economic activities in China, the Eurozone’s impending recession, as well as the Fed’s hawkish position.
The MSCI stock indices remained steady for Friday, so far, but they dropped 3% on the weekly record. It, then, amounts to their third consecutive week of loss. S&P futures in the US lost 0.16% following the S&P 500 index’s rise by 0.3% on the first of September.
Anticipating Higher Fed Rates
The coming jobs report for August is expected to reveal more than 300,000 new jobs generated in the US economy in the last month. The unemployment rate still hovers around 3.5%. Strong reports will help the US Federal Reserve increase interest rates to fight inflation without hurting economic growth.
The stock market is pricing in as high as a 75% possibility of the Federal Reserve increasing interest rates by 75 basis points in September. This comes against the 69% votes just 24 hours before.
There was, however, a slight recovery around stocks in Europe early on Friday. They gained 0.4% from the low levels hit on Thursday, and the UK’s FTSE added 0.5%.
Equity finance registered its fourth-biggest weekly expenditure in 2022. But investors pulled out their money from bonds for the second week in a row.
There are increased fears of a recession in Europe while a survey released Thursday indicated that manufacturing took a nose-dive again throughout the Eurozone in August. Customers are feeling pressure from the increased cost of living and are reducing their expenditures.