Starting the week on better-than-expected inflation data investors took a breather, however central bank policies hammered this positive sentiment and left the hawkish message that the rates will continue to go higher until inflation is firmly sustained. The signal of higher-than-expected peak rate shook Markets that closed the week negative; another losing week for US and EU markets as fears for recession keep growing.
“Central banks delivered a blow to markets that were rebounding in anticipation of policymakers turning dovish on inflation and interest rates,” said Sunil Krishnan, head of multi-asset at Aviva Investors.
A barrage of US statistics this week that showed the economy weakening even as the labor market remained robust also caused traders some concern. The Fed’s major concern continues to be a softening of the labor market.
According to Art Hogan, chief market analyst at B. Riley Wealth, “the market has been in a tug-of-war between better-than-feared economic statistics and fears about the potential for the Fed to over-tighten monetary policy and force the economy into a recession.” If the Fed doesn’t reach its terminal Fed Funds rate by the first quarter of 2023, the tug-of-war will probably continue.
Oil prices fell by nearly $2 per barrel as a result of the spillover selling into the commodities markets. Following the Federal Reserve’s announcement that it was not done raising rates, gold prices experienced their largest weekly decline in four weeks.
Relief at the rumored end of a protracted accounting access issue with the United States was not enough to boost confidence in China, where markets are teeming with uncertainty surrounding an uncertain reopening.
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