Updated at 11:00 AM EST
US stocks traded mixed on Monday, while the dollar extended its frenetic run against its global peers, as investors retreated from risky global markets amid widespread currency turmoil and growing fears of a near-term recession.
The value of the pound tumbled overnight, which briefly sent the British currency to a historic low of 1.0327 against the dollar in the wake of last week’s “mini-budget” statement from the new Conservative government, and fresh moves were echoed in the downside for the euro, which It hit a 20-year low of 0.9632 against the US dollar, and threats of currency intervention from both China and Japan.
The turmoil comes after the Federal Reserve’s rate decision last week, which raised the central bank’s key rate to a range of 3% to 3.25%, and a hawkish expectation of more hikes to come from Chairman Jerome Powell.
The US dollar index, which measures the greenback against a basket of six world currencies, was up 0.1% at 113.312 – very close to a two-decade high – against a basket of other major currencies, while the benchmark two-year Treasury yields rose to 4.281% in overnight trade in anticipation of further Fed rate hikes before easing back to 4.22%.
In fact, CME Group’s FedWatch pegs the odds of a fourth consecutive rate hike of 75 basis points at 76.9%, up just 61.8% a week ago and 0% at the beginning of September.
On Wall Street, the S&P 500 was up 8 points in late morning trade, while the Dow Jones Industrial Average – which narrowly escaped from falling into bear market territory on Friday – fell 30 points. The technology-focused Nasdaq gained 80 points.
Inflation rates and inflation expectations will be in sharp focus again this week with the core PCE price index released on Friday and Federal Reserve Chairman Jerome Powell scheduled to deliver opening remarks to a banking conference in St. Louis at 7:30 a.m. ET on Tuesday .
However, the weak growth outlook is putting downward pressure on commodity prices at the same time that central banks are accelerating their hawkish rhetoric, suggesting that investors are adding stagflation risks to their list of near-term concerns about the volatile global economy.
The global economy has “lost momentum in the wake of Russia’s unprovoked, unjustified and illegal war of aggression against Ukraine,” the Organization for Economic Co-operation and Development said on Monday, adding that production is likely to be $2.8 trillion lower than the previous think tank. expectations as a result.
West Texas Intermediate crude futures for November delivery rose 90 cents at $79.65 a barrel in early New York trading, while Brent contracts for the same month fell 70 cents to $86.90 a barrel.
Oil traders are likely to follow developments in Hurricane Ian’s path closely, as the accelerating storm gathers pace in the western Caribbean with an expected path to hit Florida’s Gulf Coast early this week.
Sentiment was further affected by the results of Italy’s national election at the weekend, which is likely to secure a majority victory for the right-wing coalition led by Giorgia Meloni and her Brotherhood of Italy party.
However, in Europe, the Stoxx 600 Index rose 0.26% in late afternoon trading in Frankfurt while the British FTSE 100 Index, whose major components earn the bulk of their returns outside the UK, rose 0.4%.
Amazon (AMZN) Stocks were an active driver after the world’s largest online retailer said it would hold a shopping event in early October to attract demand from value-focused consumers.
Las Vegas Sands (LVS) Stocks were also in focus, and US casino operators rose sharply after officials in Macau, the world’s largest gaming hub, agreed to allow tour groups from mainland China for the first time in nearly three years.