Wall Street indexes fell hard on the first trading day of the week on concerns about how much the Fed will raise interest rates and how successful it will be in reining in inflation, the war in Ukraine and the Kovid restrictions in China.
The first futures of the new day are on the rise in the S&P 500 and Nasdaq 100 indices, which fell by 3.20 percent and 3.98%, respectively.
But in Asia, the Japanese Nikkei 225 and Hong Kong Hang Seng are negative. The Chinese CSI 300 diverges favorably with a slight increase. The recovery in China allowed the MSCI Asia Pacific Index to partially compensate for its daily losses, which at one point reached 2 percent. European futures indices are also falling.
The US 10-year bond yield has dropped to 3.03% from 3.14 percent at the start of the week. The Bloomberg Dollar Index is slightly negative this morning after rising 0.34% yesterday, but it is close to the highest level it has seen since 2020.
With its risk escaping from instruments, Bitcoin fell below $30,000 for the first time since July 2021 at some point, bringing its loss since its November peak to around 55 percent. In addition to economic concerns, oil prices decreased to $ 101 as the EU softened some of the sanctions proposals for Russian oil.
Liquidity warning from the Fed
Pointing out the risks stemming from the Ukraine war, monetary tightening and high inflation, the US Federal Reserve warned that liquidity conditions in financial markets could deteriorate.
“By some calculations, market liquidity in the recently issued U.S. cash Treasury securities and equity index futures markets has declined since the end of 2021,” the Fed said in its Financial Stability Report.
“Although not as extreme as in the past, the risk of a sudden and significant deterioration in liquidity conditions seems high,” the report said. Commodity markets have suffered a notable dysfunction.”
Fed Governor Lael Brainard, who published a statement with the report, said that the war "leaded to large price movements and margin calls in the commodity market" and underlined the risk of contagion to major financial institutions.
In addition, the report said, "Solid inflation and rising interest rates in the United States may adversely affect domestic economic activity, asset prices, credit quality and financial conditions more generally." U.S. housing prices were also brought up, which they said could be "particularly sensitive to shocks" given the high valuations.
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