2022/05/12 (045) Column

Dow Jones Falls For The 6th Session In A Row,
While European Markets Face Renewed Pressure.
Oil Prices Turns Positive After Wild Trading Range,
Meanwhile Cryptocurrency Market Turmoil Continues.


The sell-off on the US stock markets knows no stopping. As in the past few days, the technology sector was hit harder than “old economy” stocks on Thursday. The Nasdaq 100, dominated by tech companies, lost another 1.59 percent to 11,777 points. The index has lost around 28 percent since the beginning of the year. Above all, rising capital market interest rates are causing investors to sell tech stocks.

The leading index Dow Jones Industrial fell by a further 1.30 percent to 31,421 points. It fell to its lowest level since early March last year. Since the beginning of the year, the setback has widened to more than 13 percent. The market-wide S&P 500 fell 1.38 percent to 3881 points on Thursday.

The losses on the stock markets are mainly due to the great uncertainty as to how quickly and how much the US Federal Reserve will raise interest rates. “There is a fear that the base rate will rise too quickly and that the economy will be plunged into recession as a result,” wrote economist Cyrus de la Rubia of Hamburg Commercial Bank. The economic data from the USA would give no cause for concern. However, the recent slump on the stock markets “can be interpreted as an indication that investors are expecting worse times and are therefore selling shares”.

In the Dow, tech stocks such as Apple, Microsoft and Intel continued to fall. Apple shares fell to their lowest level since mid-October last year. They had been replaced the day before by the Saudi Arabian oil company Saudi Aramco as the most valuable company in the world. The important iPhone supplier from Taiwan Foxconn had to suspend production in Shenzen, China, as the number of corona infections is currently increasing in China and the government has taken extensive lockdown measures. According to reports, the Apple supplier Unimicron is also said to have suspended production.

In addition, a study by the US bank Wells Fargo weighed on the papers of GM and Ford. GM lost five percent and Ford three percent. Analyst Colin Langan argued that EV production costs are likely to increase sharply. Higher raw material prices alone added an estimated $12,600 to the total cost of a GM Silverado vehicle. The papers of the electric car producer Tesla fell by two percent.

Initially, the Beyond Meat papers were also under great pressure after the meat substitute manufacturer’s disappointing quarterly figures. The price collapsed by more than 20 percent in early trading, but then turned positive. From the record high at the beginning of 2021, the papers had lost more than 90 percent. A good three years ago, Beyond Meat dared to make the leap onto the trading floor.

Dow Jones Falls for 6th SessionThe stock markets remained volatile on Thursday amid lingering worries over the implications of an aggressive tightening on the growth momentum. The Dow closed 104 points down, the S&P 500 fell 0.1% while the tech-heavy Nasdaq was marginally up. The market movement came on the heels of April’s hot consumer price data, leaving bets of aggressive Fed tightening broadly intact as the central bank seeks to tame runaway inflation. Meanwhile, data showed that producer price inflation eased in April but still remained elevated and the number of Americans filing new claims for unemployment benefits rose for a second month.

European Markets Face Renewed Pressure

European bourses came under renewed selling pressure on Thursday, with the regional STOXX 600 index finishing in the red and the DAX 30 index falling almost 1%, as investors grew worried that a tightening monetary policy to curb record inflation could tip the eurozone into recession. Falls were most pronounced among utilities and energy stocks, while the technology sector enjoyed some gains. Meanwhile, in the UK, the economy unexpectedly shrank in March, and preliminary data showed GDP growth fell to 0.8% in Q1, below analyst estimates of a 1% expansion. On the earnings front, Siemens dropped over 2% after the company said Q2 profits fell, and its exit from Russia cost roughly €600 million. In contrast, Coca-Cola’s bottling business, Coca-Cola HBC, jumped more than 5% as net sales rose 31% over a year earlier last quarter.Brent Crude Turns Positive

Brent Crude futures were trading around above $108-per-barrel as investors weighted tighter global supplies stemming from Russia’s invasion of Ukraine against a weakening global economic outlook and concerns about subdued demand. Earlier this week, Russia sanctioned 31 companies based on a retaliatory answer to sanctions imposed by Western nations. At the same time, a looming European Union ban on oil from Russia could further shrink supplies. Keeping a lid on prices was prolonged Covid lockdowns in the world’s top crude importer China and fears over the impact of rising rates on global economic growth.Cryptocurrency Market Turmoil Continues

The world’s most-traded cryptocurrency, Bitcoin, tumbled below $26,000 for the first time since December 2020, as investors continued to ditch riskier assets amid lingering concerns about economic growth and aggressive tightening monetary policy. Exacerbating the selloff was the collapse of TerraUSD, which crashed virtually 100%, breaking its $1 peg. Other cryptocurrencies also saw their valuations fall sharply, with Cosmos, Avalance, Solana, and Polygon tumbling more than 40% this week.