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US Real GDP contracted by 0.6%, US stocks tumbled


US stocks tumbled on Thursday, suffering from heavy daily losses and plunged to the lowest since November 2020 as another group of Federal Reserve officials struck a hawkish tone on policy tightening. Federal Reserve (Fed) Bank of Cleveland President Loretta Mester cited on Thursday that they are not yet at a point where they could start thinking about stopping interest rate hikes, meanwhile San Francisco Fed President Mary Daly also said the central bank should curb inflation in a manner that avoids a difficult downturn. On the economic data side, US Real GDP contracted by 0.6% in Q2 and remained in line with the estimates.

In the Eurozone, tensions between the Union and Moscow over gas deliveries escalated after the suspected sabotage of the Nord Stream pipelines, which result in Germany’s relief package in response to higher gas and electricity prices. On top of that, today’s German Retail Sales data, which is expected to decline firmly by 5.1%, which be closely watched by traders as European Central Bank President Christine Lagarde is looking to hike interest rates by 125 basis points in the coming monetary policy meetings.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined on Thursday as the S&P 500 fell as much as 2.9% during Thursday’s session but trimmed losses as markets closed. The S&P 500 was down 2.1% on a dailyDow Jones Industrial Average also dropped lower with a 1.5% loss for the day. All eleven sectors in S&P 500 stayed in negative territory as the Utility sector and the Consumer Discretionary sector is the worst performing among all groups, losing 4.07% and 3.38%, respectively. The Nasdaq 100 meanwhile dropped the most with a 2.9% loss on Thursday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar declined lower on Thursday, extending its downside momentum and remained under pressure near the 112 area despite Wall Street resuming its slump and trimming all Wednesday’s gains. The falling US Treasury bond yields were acting as a headwind for the safe-haven greenback. However, the fact that US central bank officials reiterated the need for higher rates should limit the losses for the US dollar.

GBP/USD surged on Thursday with a 2.09% gain after the cable refreshed its daily high above the 1.110 mark as a slight improvement in sentiment keeps most G8 currencies higher against the greenback. On the UK front, Prime Minister Liz Truss said that she was willing to take controversial decisions, doubling down on the economic plan. Meanwhile, EUR/USD also advanced for the second consecutive day and refreshed its daily high above 0.980 level amid US dollar weakness. The pair was up almost 0.80% for the day.

Gold was nearly unchanged with a 0.03% gain for the day after rebounding from a daily low that was touched during the European session, as the precious metal cheered the softer US dollar but failed to respect the market’s grim conditions. Meanwhile, WTI Oil retreated lower with a 0.37% loss for the day after retreating from the weekly top surrounding $82.50 the previous day.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
CNYManufacturing PMI (Sep)09:3049.6
CNYCaixin Manufacturing PMI (Sep)09:4549.5
INRInterest Rate Decision12:305.9%
EURGerman Unemployment Change (Sep)15:5520K
EURCPI (Sep)17:009.7%
USDCore PCE Price Index (Aug)20:300.5%