Crude Oil Renews Lows; Stocks Extend Losses on Rate Fears

Yesterday saw the continuation of the market’s “risk-off” sentiment, triggered by the Fed’s “Monetary Policy u-turn” fading. This affected the stocks and the US Dollar. Some market participants have advised that the latest economic figures in the US have put a 50-basis point hike in doubt. However, most economists advise a 50-basis point is still largely expected. However, this may change if the Producer Price Index and inflation figures are higher than expected.

Equities and Safe-Haven Assets

The Nasdaq 100 saw its strongest decline since the first week of November, as did most of the global equity markets. However, safe haven assets such as gold and the bond market did not see an increase in value even with the decline in the stock market. Below (Under Dax Sub-heading), we will explain the reasons behind the latest decline in US and global stocks.

According to the US Commodity Futures Trading Commission, short positions still lead over long positions. The US Dollar, on the other hand, has increased in value over the past 48 hours. Many economists advised the US Dollar may be undervalued at a price under 104.50.

Crude oil

The price of crude oil also continues to come under pressure and has formed its 4th day of consecutive declines. The price again renewed its lows after declining by more than 5% during yesterday’s trading session. crude oil this morning is slightly higher but not receiving any buy signals from technical analysis.

Crude oil price chart.

The price has come under pressure from Saudi Arabia and other major exporters, who lowered their prices for crude oil, which sparked concern over the level of demand. Saudi Arabia decreased their prices by $2.20 for China and $1.80 for the European Union. The price was also influenced by the Fed taking a potentially more hawkish stance in December than initially expected.

Though traders should note that the price is trading at a previous support level and may be supported by the re-opening of China, investors are also closely monitoring the price cap on Russian oil and Russia’s response, which has not yet come.

DAX (German-30)

The price of the DAX has generally performed well compared to other European Indexes and did not decline as vigorously as US stocks. Nonetheless, the price of the DAX did decline yesterday by 1.45%. The price this morning has slightly increased, forming a retracement but remains lower than the previous impulse wave. Therefore the price may potentially come under further pressure.

DAX price chart.

The global equity markets had generally performed well during November as it seemed that interest rates would reach their peak soon, and the economy generally remained stable. However, December tends to be a difficult month for the stock market. This is known as the December and January Effect.

In addition, the monetary policy may rise by at least a further 1% and remain there for no less than 12 months. Generally, this can harm economic growth and consumer demand which is not great for equities. However, this will also depend on the economic data over the next 2-3 months. Mainly in Germany, France, and especially the US.

Equities worldwide came under pressure after multiple banks in the US spread a word of concern to the financial trading markets. Goldman Sachs and JP Morgan Chase both took part in interviews yesterday afternoon and advised that the economy looks “gloomy” for 2023. According to most economists, the global economy will likely fall into a recession or at least a prolonged period of stagnation. JP Morgan advised markets that the bank would make 1,600 employees redundant.

On the positive side, German industrial orders showed an increase of 0.8% after declining by 4.0% the previous month. In annual terms, the decline in the indicator slowed down from -10.8% to -3.2%, which again turned out to be significantly better than forecasts at the level of -7.5%. Throughout the day, traders will look at the EU’s GDP figures for the 3rd quarter.