Bloody Friday in global markets - today's stock market declines

23.09.2022 16:42|Conotoxia Ltd Analyst Team

The vision of ever-increasing interest rate hikes in the US, along with worse macroeconomic data readings in the form of PMI indexes, may have negatively affected stock indexes on Friday 23.09.22. An addition to this was the UK's tax cut plan, which in the current situation could send investors into a tailspin.

As of 12:52 GMT+3, Germany's DAX is losing more than 2 percent, Britain's FTSE100 is down nearly 2 percent to 7036 points. (the lowest in 10 weeks) the broad Stoxx Europe 600 index of European companies has fallen 20 percent from its November 2021 peak to 391 points, indicating a potential downswing. The EU50 index hit its lowest level in 22 months at 3356 points, while Germany's DAX fell to 12354 points, its lowest in 22 months.

Announcements of more hikes, UK plan and weak data

There seems to be no good news in the markets today, but worse news, which may be reflected in the behavior of stock indices. Stock market investors face the prospect of increasingly expensive capital on both sides of the Atlantic, as ECB President Christine Lagarde has said that Eurozone policymakers will continue to raise interest rates over the next few meetings, and markets are betting that the ECB deposit rate could reach 3 percent by June 2023. 

On top of that, there may be increasingly weak macroeconomic data, such as today's series of PMI index readings. They show that soaring energy prices continued to hamper economic activity in the eurozone, and September PMI data showed that the eurozone and German private sectors contracted for the third consecutive month. The S&P Global Flash Eurozone Composite PMI fell to 48.2 points in September 2022 from 48.9 in August. Excluding pandemic shocks, the reading was the lowest since May 2013. New orders fell the most since April 2013, excluding periods of pandemic restrictions, and the backlog of unfilled orders fell for the third consecutive month.

stock market falls today chart

Source: Conotoxia MT5, DE40, D1

UK with fiscal plan

Financial markets may have been dealt another blow with the announcement of the implementation of the UK's £161 billion fiscal plan over 5 years, Bloomberg reported, which under the current circumstances could be a breakneck task with an unknown outcome. On the one hand, the Bank of England has announced the possibility of selling £80 billion worth of bonds within 12 months and further interest rate hikes, and the government may also raise funds from bond sales for its plans. This could lead to a bump in the British financial market, where bonds, stocks and the British pound seemed to cheapen even simultaneously.

today's falls on UK100 stock market chart

Source: Conotoxia MT5, UK100, H4

Investors in the interest rate market now seem to be pricing in the possibility of a 1 percentage point increase in the Bank of England's main interest rate by November, in just over a month. To summarize the events in the UK in recent hours, per Bloomberg: the Truss economic plan is causing UK markets to collapse, the UK is planning the biggest tax cuts since 1972 to spur economic growth, UK bonds are falling as the government will increase borrowing more than expected, the UK is likely already in recession as the pound's weakness increases inflation.

What's next after such a sharp plunge in the markets?

It seems that financial markets need stabilization in expectation of central banks' actions. Currently there seems to be a chase for higher and higher possible interest rates in the future. Investors do not know where this race and festival of hikes will actually end. No one   probably wants a situation in which a loan one month is at a given interest rate, the next month at a different one, and in six months the interest rate may be  different. In such a situation, business cannot function properly, and neither could  the financial markets.

Did you know that CFDs allow you to trade on both falling and rising prices?

Derivatives make it possible to open buy and sell positions and thus trade on both rising and falling quotes. At Conotoxia, you can choose from CFDs and DMA CFDs on more than 4,000 shares of companies listed on stock exchanges from all over the world. To find a CFD or DMA CFD on a stock, all you need to do is follow 4 simple steps:

  1. To access Trading Universe - a state-of-the-art hub of financial, information, investment and social products and services with a single Smart account, register here.
  2. Click "Platforms" in the "Invest&Forex" section.
  3. Choose one of the accounts: demo or live
  4. On the MT5 platform, search for the CFD action you are looking for and drag it into the chart window. Use the one-click trading option or open a new order with the right mouse button.

 

Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

 

Like the article?
Share it with friends!


See also:

Sept 23, 2022 9:58 am

Yen to USD outlook after currency intervention

Sept 22, 2022 3:57 pm

Salesforce aims to reach $50 billion in revenue

Sept 22, 2022 12:27 pm

Central banks deal cards on the currency market at the end of the week

Sept 19, 2022 3:36 pm

Are valuations on Wall Street currently attractive?

Sept 19, 2022 10:06 am

Fed decision - hot week for central banks. USD, GBP in focus

Sept 16, 2022 3:30 pm

Adobe shares plunge after news of Figma acquisition

76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trading on CFDs is provided by Conotoxia Ltd. (CySEC no.336/17), which has the right to use the Conotoxia trademark.