Euro approaches parity with dollar as investors brace for a slowdown. On Tuesday, Wall Street stocks tumbled, which became a cause of fear and worried for investors. Investors are worried about an impending global recession.
Asian MSCI index of shares fell to a two-year low, bringing the Stoxx 600 index down 0.3 percent, or almost 15 percent, for the year.
Close Parity Between Euro And Dollar
First time since 2002 that the euro was close to $1. To maintain its best performance since 2002, the US dollar index, which compares six different currencies but heavily weights the euro, climbed by 0.4% today.
A looming slowdown in the US economy has alarmed investors. Even several business and consumer surveys point to this. According to data released on Wednesday, the Federal Reserve’s ability to support the markets is being hampered by inflation, which is expected to hit an all-time high of 8.8 percent last month.
The Rise In Commodity Prices
At €171.5 per megawatt-hour, futures linked to TTF, the European wholesale gas price, were up 1.4 percent from early June. Oil benchmark Brent crude dropped 1.9 percent to $105.11 a barrel.
A Slowdown In Investor’s Earnings
Over this year, the World FTSE index of developed and emerging market shares has declined by more than 20 percent as interest rates rise and push down companies’ valuations.
‘Companies’ earnings growth has begun to slow for investors recently. When a recession does occur, a lot of weakening in revenues that haven’t begun will occur.
A senior equities strategist at Generali Investments, Michele Morganti, believes that the weakening economic momentum and rising expenses will lead to more CEO comments about pricing power and company margins.
Recession Like Conditions
There was a recession and significant inflation in the 1970s, according to Nicholas Colas, DataTrek Research‘s co-founder. He even pointed out that this year’s economic figures show the same trend as in previous years.
Federal analysts predict a 0.75 percentage point rate hike at the July 15 meeting from 1.5% to 1.75 percent. By early 2023, futures markets are already pricing at a benchmark rate under 3.5% as the US central bank pulls back on its ultimate hike in borrowing costs.
Bond Prices On Rising
As investors sought safe havens, the price of government bonds continued to rise on Monday.
The prospect of a Russian retaliation against sanctions for its invasion of Ukraine has exacerbated the recession in Europe, where gas supplies could be cut off, causing an energy shock and proliferation in the living cost.
The US Treasury note yield for ten years swings inversely to its price and is used as a benchmark for international debt costs. It dramatically decreased by 0.08 percentage points to 2.92 percent.
Historically, recessions have been predicted by an inverted yield curve, in which the yield on the two-year Treasury note dropped from 7% to 3%.
Since 2002, the euro and dollar have near parity. Today, the euro-heavy US dollar index rose 0.4%. Asian stocks hit a two-year low, dragging down the Stoxx 600 index by 0.3%.
The World FTSE index of developed and emerging market equities has plummeted by more than 20 percent. The risk of a Russian reprisal against sanctions for its invasion of Ukraine has aggravated the recession in Europe, where gas supplies could be cut off, producing an energy shock.