It looks like a recession is on the way and the financial markets are reacting accordingly. in the last days, Stock markets, oil and some currencies fell sharply, whereas Bond yields have gone up. Higher financing costs add pressure to states, especially those with the highest debt.
“The recession is coming for the euro zone.” The S&P Global firm made the same warning in a report published on Friday on the bloc’s PMI indices and some of its main economic indices. Panic erupted in the parks of the old continent.
PMI index for the euro arean September andn 48.2 points, seven tenths less than in August. Given that 50 points separate growth from contraction, the reading was the lowest since January 2021. The data for Germany (45.9 points) was the lowest since May 2020.
[Las subidas de tipos llevan a los bonos a máximos de 2014 con las elecciones italianas a la vuelta de la esquina]
number he filled the glass Ias european bags, he already was about to overtake Reference to greater geopolitical uncertainty and a general increase in interest rates. las Friday’s fall reached atI 2,5% You The week ended with a cut of around 5%.
Russian President Vladimir Putin announced a partial military mobilization last Wednesday. The Russian President addressed citizens in an official presence to announce the reinforcement of Russian military forces in Ukraine, using 300,000 of their military reservists.
Rate of interest
same day, heThe United States Federal Reserve (Fed) raised interest rates by 75 basis points. US central bank raisedFrom value of money to the extent between 3% and 3,25% In five meetings, the last three at the stroke of three-quarters of a point.
Rates in the Atlantic are now at 2008 levels, as Too Occurs in the United Kingdom, where the Bank of England climbed up up to 2.25%. Tookas institutions Switzerland, Sweden and Norway also raised their benchmark rates. Even Indonesia and the Philippines did.
In virtually all of their communications, central banks have left the door open to keep raising rates in future with a view to arresting the rise in prices.
Fed members themselves expect the year rate to close above 4%. Looking at 2023, they keep the value of money above 4.5%. Although without clear data, The European Central Bank (ECB) has also indicated that further increases will be needed in the future., In early September, it raised rates by 75 basis points for the first time in history.
[El BCE y la Fed no descartan más subidas de tipos de tres cuartos de punto en los próximos meses]
Fears of aggressive rate hikes in the United States could trigger a recession On Friday, the Dow Jones hit a nearly two-year low. Selective also entered into what is known as bear market, a yield of more than 20% from the previous all-time high. He marked them by touching 36,800 on January 4. It is now trading at around 29,500 integers.
The situation for the S&P 500 and above all, the Nasdaq is even worse. While the Fed has made it clear that it will continue to fight inflation at all costs, Several companies have launched to lower their forecasts for 2022. FedEx and Ford have been the latest and greatest.
The worse economic outlook is not only weighing down European stock markets, They also weigh on the behavior of the euro. The community currency turned less than $0.97, its lowest value in two decades.
the fall of pounds sterling more than the dollar. The British currency has fallen to a level not seen since 1985, after the government of British Prime Minister Liz Truss announced an aggressive tax cut worth £45,000 million (some €50.8 billion).
[El euro, abocado a los 0,95 dólares si la crisis energética desata una recesión económica en la eurozona]
the yen also fell, This decline has come to the lowest level 24 years ago, that Japanese government And the Bank of Japan had to intervene in the Tokyo foreign exchange market to support its currency. He sold the dollar and bought the yen to prevent its rapid devaluation.
opposite of this, The dollar has hit a 20-year high. The strength of ‘Green Ticket’ and the drums of recession dragged for oil To reduce at the beginning of the year. already off $90 a barrel, lOS Crude prices – both European Brent and US West Texas Intermediate – fell for the fourth week in a row.
FWithstand all these shocks, Bond yields rose. In the United States, interest on 10-year bonds exceeded 3.8%, something that had not happened since 2010. 2-year debt reached 4.27%, a rate not seen since 2007.
The difference between the two returns stood at 58 basis points, the highest in the past two decades. This is known as the reversal of the yield curve, which for many analysts is a sign of an impending recession.
[España, obligada a pagar rentabilidades de 2013 para colocar deuda cuando quedan casi 60.000 millones por emitir]
In Europe, while the pound sank, UK 10-year bond yields rise sharply, It reached 3.84%. increase of giltsknown as the British loan, A strong upward move took place across the continent.
dam The Germans – considered in terms of being the safest – climbed to more than a 2011 high of 2.11%. Over the same period, Spanish bonds continued to move up to 2014 levels, while The Italian 10-year hit 2013’s highest level just two days before the Italians went to the polls.
The Italian risk premium – the difference between the interest on German bonds and Transalpine’s – rose to 232.5 basis points. Election in Italy is also a reason Uncertainty and risk to the markets Before a possible victory for far-right Giorgia Meloni.
Follow topics that interest you
Read More: Stock Markets, Euro And Oil Sink While States’ Debt Pressure Mounts