Global stocks maintained a cautious stance last week, following sharp monthly gains. Investors try to put the pieces together of what to expect from the Federal Reserve’s next meeting in December.
Relaxing in China’s Covid measures and Fed Chair’s Jerome Powel comments uplifted investor sentiment, with many betting on a slowdown on the Feds hawkish policy.
On the other hand, hot US job reports were interpreted as a signal that the Fed will keep tightening even if officials downshift the pace of hike this month.
Others focus on where the interest rates will peak and argue that steep rate hikes could tip global economies into recession.
“Consensus is that recession is coming but equities cannot bottom before it starts, inflation won’t fall quickly so central banks can’t blink, China reopening will be a messy process, and Europe remains tricky,” Barclays Plc strategist Emmanuel Cau wrote in a note.
American manufacturing contracted for the first time since May 2020 adding to the fears for recession. Pressure signs also come from company earnings, with software maker Salesforce Inc. the latest to warn of slowing sales, while companies, ranging from Amazon.com to Ford Motor Co., have announced tens of thousands of job cuts.
Therefore, even though the Fed might slow down and increase interest rates by 50 basis points on the December meeting, strong job market implies that the Fed will need to hold rates higher for longer.
Strategists from Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc. are pointing to equity declines early next year amid the specter of an economic recession. “We’re selling risk rallies from here,” the BofA strategists said, warning unemployment would replace inflation as the main worry in 2023.
On investor’s radar is also the annual convention of the Chinese Communist Party taking place early December. Key discussion points are a layout for a pragmatic approach towards Covid controls as well as the need to boost economic growth.
Dollar gives more ground
The dollar is pushed lower lead by rallies in lower-yielding currencies such as the yen and euro. Fed officials are speaking of a slow-down in rate hiking, raising hopes that the Fed is close to the end of its tightening cycle. Chinese Yuan soars on hopes of reopening and relaxing of covid measures.
Oil posted a weekly gain despite the decreased momentum following Fridays OPEC+ stance to pat its existing 2million-barrel-per day cut. If the alliance keeps the same production levels for January and beyond, investors will be relying more on China’s next moves, the world’s largest crude importer. China has been sending conflicting signals regarding demand due to the lockdowns it imposed on some of its largest cities following a record rise in new coronavirus infections this year.
|wdt_ID||Indices||Last Price||YTD Chg %||1 Yr Chg %||Volatility||PE RATIO||Price to Book Ratio||Dividend Yld %|
|2||DOW JONES INDUS||34,590||-4,81%||1,67%||20,11%||19,910||4,630||2,01%|
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