It’s not just concerns about interest rate hikes that continue to weigh on Wall Street. Investors are also concerned about the fear of an energy crisis in Europe. The euro falls to its lowest level in almost 20 years. Oil prices are clearly under pressure.
Amidst the tension between fears of a recession and sharply falling oil prices, things have been turbulent on the US stock exchanges. A very weak start was followed by a strong recovery, led by technology and growth stocks, which are considered to be particularly sensitive to interest rates. The triggers for the recovery were market interest rates that continued to fall significantly, the very strong dollar and the collapsing oil prices, which dampened fears of inflation and thus expectations of interest rate increases.
However, concerns continued that the US Federal Reserve’s rate hikes to curb inflation could result in a recession. Added to this was the fear of an energy crisis in Europe, also with potentially fatal consequences for the economy. The fact that US President Joe Biden is said to be considering rolling back some of the trade tariffs imposed on China by his predecessor Donald Trump has largely gone unnoticed.
The Dow Jones index lost 0.4 percent to 30,968 points. At the low it was over 600 points lower. For the S
The US 10-year yield fell another 7 basis points to 2.82 percent, just below the 2-year yield in what is considered a recession signal. In mid-June it was already at almost 3.50 percent. Bonds were sought after as a supposedly safer haven and also with speculation that the US Federal Reserve might step on the brakes on interest rate hikes given the increasing signs of an economic slowdown. Meanwhile, US orders in May were significantly better than expected.
The dollar rose against the euro to its highest level in 20 years. While this tends to be unfavorable for exporters, it is helping to depress US inflation. The euro fell 1.6 percent to $1.0260.
On the one hand, the energy crisis in Europe weighed on the euro and, on the other hand, the fact that the ECB only announced its first and only small rate hike for July, while the US central bank has long been turning interest rates and is continuing to do so. However, the dollar also showed strong strength against other currencies (dollar index 1.3 percent) because it was also sought after in its function as a safe haven in an environment characterized by a great deal of uncertainty.
Oil prices plummeted with worries about the economy and the strong dollar. They fell by around 10 percent at the top and marked the lowest levels since mid-May. Another reason market participants cited was that US oil production is likely to increase after the Supreme Court just stripped the Environmental Protection Agency somewhat of its say in new production sites.
The price of gold fell sharply by 2.3 percent and reached a low for the year over the course of the year. It was weighed down by the strong dollar and the prospect of rising interest rates. Analyst Chintan Karnani from Insignia Consultants spoke of a technical slump – also for silver and copper – aggravated by fears of recession and the faster rate hikes by various central banks.
On the stock market, papers from the energy sector were at the end with a minus of 4.0 percent, followed by utility stocks (-3.4 percent).
The course of Curevac (-1.1 percent) was hardly impressed by the news that the vaccine manufacturer sees its intellectual property rights in mRNA technology being violated by the competitor Biontech (2.2 percent) and is therefore suing for compensation want. Moderna gained 3.7 percent. The US vaccine manufacturer also relies on mRNA technology.
Exxon Mobil lost 3.1 percent, although second-quarter earnings are expected to be as much as $18 billion, according to a statement to the US Securities and Exchange Commission. It would be the highest in almost 25 years.
Tesla was up 2.6 percent. At the weekend it became known that vehicle deliveries had fallen for the first time in more than two years compared to the previous quarter, but had increased significantly compared to the previous year.
