Yesterday's trading session in markets around the world could bring a lot of excitement to investors due to increased volatility and stirrings over whether the Chinese developer's problems are local or global.
Nasdaq and S&P 500 trim losses
On Monday in the USA, the Dow Jones fell by almost 2 percent to 33970 points, the S&P 500 index lost 1.7 percent and was in the area of 4350 points, while the Nasdaq fell by more than 2 percent in the area of 14700 points. In contrast, U.S. stock futures rose sharply earlier today, Tuesday, after the White House announced that the U.S. will reopen in November to air travelers who are fully vaccinated against COVID-19. The announcement applies to travelers from 33 countries.
The Dow Jones on Monday night hit its lowest since July 19, and the S&P 500 and Nasdaq posted their biggest daily declines since May, dragged down by debt troubles at Chinese developer Evergrande. S&P Global Ratings says Beijing is unwilling to provide direct support to the debt-laden developer.
H4 chart of CFDs on the S&P500. Source: Conotoxia cTrader platform
What will the Fed do?
Investors are awaiting the results of the FOMC meeting, which will begin today and conclude on Wednesday. The Fed has already hinted that tapering could happen later this year, but investors are waiting for more details, especially since mixed economic data came out last week. Michigan consumer sentiment was slightly below expectations, retail sales unexpectedly rose in August, while the number of Americans filing new claims for unemployment benefits rose from 312,000 to 332,000 last week.
Gold price up
The winner of yesterday's declines seams to be gold, which was one of the few markets that rose in price yesterday. It is also worth noting that the rise in the price of gold occurred at a time when the US dollar seemed to be strengthening, which may mean that gold is treated as a safe haven to which capital flows when stock markets fluctuate more strongly. This could be good news for later in the cycle when economies have peaked and we move from expansion to slow down and it becomes increasingly difficult for companies to improve performance. Gold rose from around $1,740 to over $1,760 per ounce yesterday.
H1 chart of CFDs on gold. Source: Conotoxia cTrader platform
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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