Fear of a sharp rise in interest rates in the United States and a subsequent recession in the world’s largest economy shook global markets yesterday, from Asia, through Europe, North America and Latin America.
and that is The market has begun discounting the tightening of monetary policy by that country’s central bank, the Federal Reserve, To combat inflation, which reached, as was known last Friday, 8.6 percent annually in May, which represents a maximum of 40 years.
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To make a decision, the Federal Reserve’s Monetary Policy Committee will meet on Tuesday and Wednesday. Immediately, Markets expect a half-percentage point adjustment to benchmark ratesafter increasing a quarter of a point in March and another half a point in May, the largest rise since 2000.
In addition, in the face of persistent inflation, there are already many analysts who suggest that the US central bank may raise interest rates by as much as 0.75 percentage points.
According to Bloomberg, fears are emerging that the intense pace of monetary tightening will push the world’s largest economy into a recession as traders build protection against falling stocks, bet on Black Swan funds on the apocalypse and buy dollars, among other defensive operations.
“All classic slack trades come into play,” said Peter Chatwell, Head of Trade for Global Macro Strategies at Mizuho International Plc.
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Global stock market crash
Expectations of fresh US money price hikes stained global stock markets in red yesterday. According to New York agencies, the Dow Jones index lost 2.79 percent to 30,517.06 points. The Nasdaq Technology Index, 4.68 percent, to 10809.22, and the S&P 500 of the largest stocks in the stock market, 3.87 percent, to 3,749.91 units. The S&P 500, the most represented index in the market, has entered bear market territory, meaning it has lost more than 20 percent from its all-time high in January (-22 percent as of Monday’s close).
Oanda’s Craig Erlam summarized that stock markets are “in free fall at a time when the reality of high inflation, stronger monetary tightening and a cost-of-living crisis are really being felt.”
These declines are added to those recorded last week on Wall Street. In the weekly index, the Dow Jones Industrial Average fell 4.58 percent, the Standard & Poor’s fell 5.05 percent, and the Nasdaq fell 5.60 percent.
Meanwhile, Europe experienced the fifth consecutive day of decline: the Paris stock market lost 2.67 percent; Frankfurt 2.43 per cent and London 1.49 per cent. The main London FTSE-100 index fell 119.92 points to 7,197.60 points, while the secondary FTSE-250 index fell 2.05 percent to 19,269.60 points. The Spanish stock market also lost 2.47 percent.
In Asia, the situation was similar. The main index of the Tokyo Stock Exchange, the Nikkei, fell about 3 percent. The index, which includes 225 market representative addresses, fell by 836.85 points to 2,6987.44 integers.
Impact on Bonds and Bitcoin
The possibility of a rate hike also affected bonds and cryptocurrencies. On the other hand, the 10-year US Treasury yield was 3.38% for the first time in 11 years.
For its part, Bitcoin fell by 14.40 percent to $23432.05. According to the Financial Times, it was affected by the decision of cryptocurrency platform Celsius Network to stop withdrawing funds from its clients and to ban transfers between accounts. Celsius Network is one of the largest cryptocurrency lending platforms in the world.
Impact on the Colombian Stock Exchange
The The Colombian Stock Exchange was not immune to the global downtrend and the Msci-Colcap local parquet index closed yesterday with a 3.01 percent drop.up to 1484.58 points.
The shares that were worst affected today were shares of Grupo Bolívar, down 9.48% to 76,020 pesos. Those in Colombia fell 7.59 percent to 40,200 pesos. And that of Semargos another 6.39% amounting to 4,952 pesos.
Grupo Energía Bogotá, Empresa de Telecomunicaciones de Bogotá (ETB) and El Cóndor also posted strong declines, with declines of -5.92, -5.45 and -5.15 percent, respectively.
Likewise, shares of Ecopetrol (-4.76%), Grupo Sura Preferred (-4.76%), Bancolombia Preferred (-4.60%), Celsia (-3.75%), ISA (-3.11%), Terpel (-2.82 percent) were also seen declining. and Corficolombiana favorite (-2.66 percent).
In the face of this general decline, the positive behavior of Grupo Argos stock, which grew by 19.65 percent yesterday, to a closing price of 16,200 pesos was highlighted. This happens after the stock is listed again on the local stock exchange after approval of the takeover offer made by the Gilinski family.
Shares of Grupo Sura also grew by 2.68 percent and Corficolombiana by 0.04 percent.
The dollar rose by more than 103 dollars
Amid uncertainty due to the possibility of an interest rate hike by the Federal Reserve and the domestic context ahead of next Sunday’s general election, the dollar started the week higher.
The US currency returned to the level of 4000 pesos, which it lost after the first election round with the surprise of the passing of engineer Rodolfo Hernandez, who is running with candidate Gustavo Petro.
in yesterday’s session, The US currency is priced at an average price of 4,016 pesos, which is an increase of more than 103 over the representative market rate (TRM).And its price for today’s session reached 3912.51 pesos. The North American currency opened today at 4,010 pesos, recording a low of 3,965.50 and a high of the day at 4,041.90 pesos.
Until we know the Fed’s position and the election results, the volatility is likely to continue. Likewise, the reaction of the markets has to do with the fact that the probability of a global recession is increasing little by little due to rising inflation, withdrawal of stimulus, increasing rates, restrictions in China and the war in Ukraine. said Juan David Palin, Head of Economic Research at Casa de Bolsa.
Despite the dollar’s rally, global oil prices rose yesterday. According to Agence France-Presse, the price of a barrel of Brent crude from the North Sea for delivery in August increased by 0.21 percent to $ 122.27. Meanwhile, the price of a barrel of West Texas Intermediate crude for July rose 0.21% to $120.93.
“Oil is the only thing in the world that has remained resilient; all that is left is falling,” summed up Matt Smith, analyst at Kpler. “A vicious cycle of sales swept the markets and yet oil resisted,” the analyst said.
We could have found reasons to sell, particularly with the prospect of more shutdowns in China. But it won’t be a surprise anymore because we know China’s zero-tolerance policy with the coronavirus,” Smith added.
* With information from agencies