Get 40% Off
🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Ending The Week In The Red

Published 10/21/2022, 02:12 PM
Updated 07/09/2023, 06:31 AM

Stock markets turned red again on Friday after spending the earlier part of the week in recovery mode, with yields around the world once again on the rise.

The recovery never looked sustainable, and that’s how it’s proving to be. There is still huge uncertainty over the economy, inflation and where interest rates will end up and none of that is conducive to a strong sustainable stock market recovery.

The situation in the UK looks particularly bleak and that’s before you consider the fact that the Conservative party is looking to elect a new leader less than two months after appointing the last. I’m not sure anyone is particularly confident that we’re suddenly going to see stability in government. The fact that Boris Johnson could make a spectacular return to Number 10 pretty much sums up how messed up the situation is.

Investors appear to share that pessimism as is evident in the performance of the pound, which is down 1% against the dollar. That’s naturally not been helped by another dreadful retail sales report, with volumes dropping 1.4% last month after a decline of 1.7% the month before.

That further supports the view that the economy is probably already in recession and those pressures will only intensify in the coming months as the Bank of England accelerates its tightening cycle. Although Ben Broadbent did seek to reassure markets, suggesting they were pricing too aggressively, which led to expectations being pared back a little.

Yen Slides Further As BoJ Conducts More Purchases

The Bank of Japan was active again overnight as it sought to stop the yield on the 10-year JGB from breaking above its 0.25% upper band. This is the second day it has conducted unscheduled purchases in response to market pressures, piling further misery on the yen, which has smashed through 150 against the dollar. There’s still no intervention though from the Ministry of Finance though, despite more warnings overnight.

It seems the urgency with which they’re monitoring the situation isn’t, in fact, that urgent at all. Although considering how ineffective the last intervention was, they may be wondering what exactly the correct policy response is. Sitting and waiting for the dollar to fall isn’t working either though. And it seems the BoJ is in no mood to tweak its yield curve control targets, despite inflation remaining at 3% and core rising to 1.8%.

Bitcoin Slipping Amid Risk Aversion

Bitcoin is also in the red at the end of the week, tracking moves in other risk assets. Bitcoin is off around 1.5% compared with losses of more than 2% in Europe and more than 1% in US futures. Still, it’s slipped below $19,000 this morning although that does little to change the outlook. It’s fluctuated around $20,000 for the last couple of months and this morning doesn’t really change that.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.