Europe rallies, US turns negative
The mood has lightened today and that has prompted dealers to swoop in a snap up relatively cheap stocks. Yesterday was a brutal session for equities as worries about higher interest rates and a potential cost of living crisis weighed on sentiment. US technology companies were at the forefront of the selling and the NASDAQ 100 dropped to its lowest mark since late 2020. Some of those fears have evaporated for now, even though the the underlying issues still exist. In the past few weeks, we have seen several relief rallies, and US indices have already turned negative, so it appears the bullish run is already over. Loretta Mester of the Federal Reserve confirmed she supports hiking rates by 50 basis points at the next two Fed meetings. The comments from Mester have had a cooling effect on US stocks as they are off the highs of the session, and the NASDAQ 100 is now down 0.5%. Keep in mind the tech-heavy index lost over 4% yesterday. In Europe the mood is more upbeat as the FTSE 100 and the DAX are up 0.7% and 1.5% respectively.
Yesterday, the US dollar hit a five year high as the greenback mildly benefitted from the flight to quality play, and it is higher again today. The tumble in tech stocks prompted traders to pour funds into the dollar. Following on from last week’s interest rate hike by the Fed, and the solid jobs report, the US dollar has been in high demand recently. Although the US central bank were not as hawkish as predicted, they did make it clear that rates will he hiked again in the months ahead and therefore the dollar’s bullish streak is likely to continue.
The Australian dollar is higher across the board thanks to the rebound in metals such as silver, platinum, and copper. Australia is a major exporter of minerals, and China is one of larger destinations for the shipments. When metal prices are robust, the Aussie tends to rally and that is what we are seeing today. Last week, the Reserve Bank of Australia hiked rates for the first time in 13 years, and that seems to be acting as a floor for the Aussie as the RBA gave off the impression that further rate hikes are in the pipeline.