Returning from the holiday with rapid rises, futures in American indices eroded the hope of recovery while Asian indices erased their daily gains.
The S&P 500 index, which closed last week with a decline of 5.8 percent, quickly recovered with an increase of 2.4 percent on Tuesday. However, S&P 500 futures fell close to 1 percent this morning, showing that recession concerns are again dominating the markets.
In Asia, MSCI Asia Pacific slid, led by China tech shares. Traditional safe-haven U.S.A. Treasuries and the Japanese Yen are on the rise.
The USA 10-year yield fell two basis points to 3.25%, with the yen gaining 0.4% against the dollar.
Recession expectations
After the Fed entered a tougher tightening path in the fight against inflation, investment banks are making pessimistic forecasts one after another.
After Morgan Stanley and Goldman Sachs economists, this time Societe Generale economists predicted that sales for the S&P 500 index could increase even more. SocGen strategist Manish Kabra predicted that in a "typical" recession the S&P 500 would decline to 3,200 points. That's a 13 percent drop compared to Friday's close. Kabra predicted that in the event of a 1970s-type inflation shock, the index would lose 30 percent.
Bridgewater Associates Founder Ray Dalio said he found the Fed's view that interest rate hikes would make everything better once prices were under control "naive and inconsistent". According to Dalio, reducing inflation will require "to bear a great cost".
Steve Englander of StanChart predicted that if financial conditions in the USA get tight enough, a rally of up to 5 percent can be seen in the dollar. Not all forecasts are pessimistic, though. Oppenheimer analyst John Stoltzfus stood behind his previous forecast and predicted that the S&P 500 would end the year at 5,330 points, up 40 percent from current levels.
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