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Investors worried about slowing global economy


US stocks declined sharply on Monday, witnessing heavy selling and were dragged down by safe-haven demand as investors were concerned about a global slowing economy and the spread of coronavirus in China. Investors’ sentiment soured as Federal Reserve officials stressed that more rate hikes are coming, as New York Fed President John Williams on Monday said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation.

However, investors are now looking ahead to Jerome Powell’s speech Wednesday, with many economists expecting he’ll cement bets that the Fed will slow its pace of rate increases next month. Moreover, China’s prolonged Covid restrictions weighed on investor sentiment as local governments tightened Covid controls and case numbers last week hit records since the pandemic began. On the Eurozone front, European Central Bank (ECB) policymaker Peter Kazimir said earlier in the day that the risk of recession in the Eurozone was growing, which exerted bearish pressure on the Euro.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Monday as the S&P 500 pared its monthly gain amid hawkish comments from Fed Bank of St. Louis President James Bullard. The S&P 500 was down 1.5% daily and the Dow Jones Industrial Average dropped lower with a 1.4% loss for the day. All of the eleven sectors in the S&P 500 stayed in negative territory as the Real Estate sector and the Energy sector are the worst performing among all groups, losing 2.80% and 2.74%, respectively. The Nasdaq 100 meanwhile dropped with a 1.40% loss on Monday and the MSCI World index was down 1.4% for the day.

Main Pairs Movement

The US dollar advanced higher on Monday, regaining upside traction and extending its daily gains towards the 106.50 area amid a downbeat market mood. The hawkish comments from the Federal Reserve (Fed) policymakers and the Covid woes emanating from China both acted as a tailwind for the haven greenback. The President and CEO of the Federal Reserve Bank of St. Louis have said that rates need to go higher to bring inflation down.

GBP/USD retreated sharply on Monday with a 1.10% loss as the cable dropped to a daily low near the 1.1940 mark in the late US trading session amid a risk-off market sentiment. On the UK front, there will be several BoE members due to speak this week, including BoE governor Andrew Bailey on Tuesday and chief economist Huw Pill on Wednesday. Meanwhile, EUR/USD suffered from daily losses and retreated towards the 1.0360 level amid a stronger US dollar across the board. The pair was down almost 0.53% for the day.

Gold tumbled lower with a 0.77% loss for the day after extending its daily slide to the $1,741 area during the US trading session, as China’s Covid-19 riots across the country weighed on the precious metal. Meanwhile, WTI Oil advanced sharply with a 1.26% gain for the day as OPEC+ is seen considering deeper output cuts amid a faltering market.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
EURGerman CPI (YoY) (Nov)21:0010.4%
CADGDP (MoM) (Sep)21:300.1%
GBPBoE Gov Bailey Speaks23:00 
USDCB Consumer Confidence (Nov)23:00100.0