A look at the day ahead in the US and global markets from Mike Dolan.
The economic “hurricane” that JPMorgan (NYSE:NYSE) chief Jimmy Dimon warned of in June is hitting hard across the globe and global markets are plummeting again.
In stark trade readings late Thursday, global delivery company FedEx (NYSE:) withdrew its financial forecasts it released just three months ago because it said slowing global demand accelerated at the end of August and was on course to worsen in the November quarter. . In the absence of revenue and earnings expectations as well, FedEx shares fell 16% after the bell.
The World Bank added to the overall gloom and warned late Thursday that the global economy was heading into a recession with central banks around the world simultaneously raising interest rates to combat persistent inflation.
It is estimated that the world has been in its sharpest rebound from the post-recession recovery since 1970, but it has found no or no support from major central banks and said they may need to raise interest rates by an additional 2 percentage points above two. Already noticeable increase over the 2021 average.
As markets prepare for another round of interest rate hikes from the US Federal Reserve and the Bank of England next week, stocks tumbled around the world on Friday. The MSCI global stock index was on the verge of hitting a two-month low and heading for its worst full week since June. Asian and European stock exchanges fell and US stock futures were in the red.
With two-year US Treasury yields closing at 4% for the first time in 15 years, Fed fund futures markets are now seeing policy rates as high as 4.5% by March and not seeing a return below 4% for the rest of the period. 2023.
With the growing turmoil in global currency markets as a result, the dollar has once again surged higher in the past 24 hours – hitting 7.0 for the first time in more than two years and hitting its highest level against the British pound since 1985.[FRX/}[FRX/}[FRX/}[FRX/}
In a sign of investors’ gloomy mood, markets ignored the surprising signs of resilience in China’s retail sales and industrial production numbers for August and instead focused on the fallout from the mounting housing slump.
Real estate investment last month fell 13.8%, the fastest pace since December 2021. New home prices fell 1.3% year on year in August, the fastest since August 2015.
With little sign that China will significantly ease the spread of the coronavirus soon, some analysts expect the economy to grow just 3% this year, the slowest since 1976 – excluding the 2.2% expansion during the initial Covid spread in 2020.
Foreign investors continued to exit Chinese bonds last month, and with the yuan falling, China’s foreign exchange regulator on Friday urged companies not to speculate on the currency.
The recent slide of the British pound was more pronounced. UK retail sales fell much more than expected in August, another sign that the economy is sliding into recession.
The price of oil rose on Friday, but the year-on-year rise in its price fell below 20% for the first time since February 2021.
The International Energy Agency forecast near-zero growth in oil demand in the fourth quarter due to weak demand forecasts in China, while the US Energy Department said it was unlikely to seek to refill the Strategic Petroleum Reserve until after fiscal year 2023.
Key developments that should provide further guidance to US markets later on Friday:
University of Michigan US consumer confidence in September and inflation expectations. Treasury holdings data for the month of July
US President Joe Biden meets South African President Cyril Ramaphosa in Washington
Graphic: Asia Forex Earthquake https://fingfx.thomsonreuters.com/gfx/mkt/egpbkrerkvq/One.PNG
Charts: Final Speed https://graphics.reuters.com/USA-MARKETS/znpnewmrmvl/chart.png
(By Mike Dolan; Editing by Susan Fenton [email protected] Twitter (NYSE:): @reutersMikeD)