Advertising
Advertising
twitter
youtube
facebook
instagram
linkedin
Advertising

Stocks Down, USD Up Amid Looming Government Shutdown Concerns

Stocks Down, USD Up Amid Looming Government Shutdown Concerns
Aa
Share
facebook
twitter
linkedin

Table of contents

  1. Stocks down, USD up

    Stocks down, USD up

    By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  

     

    Investors continue to dump stocks and buy US dollars on looming uncertainty regarding whether the US government will be shut in three days. There is progress regarding a 6-week short-term funding deal, but getting an approval from the Senate will be a challenge. In the meantime, falling savings, rising theft and delinquencies hint at the growing cost-of-living crisis whereas the central banks' inflation fight is certainly not over just yet. 

    The looming government shutdown talks continue feeding into a stronger US dollar. US politicians have agreed to a 6-week short-term funding to keep the government running for another month and a half, but getting approval from the full Senate will be a challenge with far-right Republicans' determination to 'shoot it down if it reaches the floor'.  

    The S&P500 fell to the lowest levels since the beginning of June and the Stoxx 600 could slip below 445 due to slowing European activity, waning Chinese demand, the European Central Bank's (ECB) pledge to keep the monetary policy tight until inflation comes down significantly. The euro's depreciation makes inflation harder to ease along with rising energy prices.  

     

    Advertising

    After a few sessions of consolidation, and despite a more than 1.5-mio-barrel build in US crude inventories last week, US crude is upbeat this morning, again. The barrel of American crude is trading above the $92 level, as the European nat gas futures flirt with the 200-DMA. The EURUSD lost around 6.5% since the July peak. Oversold market conditions call for consolidation, or recovery, yet appetite in the US dollar remains too strong to let the other currencies breathe. And if this is not enough bad news, the EU is now investigating the degree to which China has subsidized EV manufacturers. Tesla is clearly in a hot seat, but not only. Some European carmakers including Renault and BMW also have joint ventures in China and will be probed. The cherry on top, VW announced to cut EV output at German sites due to lacking demand. All this to say, there is little place to go in the market other than the FTSE 100, which could at least take advantage of the energy rally.  

     

    The combination of higher energy and stronger dollar has well pushed inflation in Australia to 5.2% in August, up from 4.9% printed a month earlier -which was a 17-month low. We could see a similar upturn in global inflation metrics due to rising oil prices. The Eurozone data will soon be coming in. Unfortunately for the Aussie, the uptick in inflation won't prevent it from getting smashed against the US dollar. The pair will likely test and take out the September support of 0.6360


    Ipek Ozkardeskaya

    Ipek Ozkardeskaya

    Ipek Ozkardeskaya provides market analysis on FX, leading market indices, individual stocks, oil, commodities, bonds and interest rates.
    She has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist in Swissquote Bank. She worked as Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
    She is passionate about the interaction between the economy and financial markets. She has been observing and analyzing a wide variety of relationships between the economic fundamentals and market behaviour over the past decade. She has been privileged to live and to work in the world's most exciting financial hubs including Geneva, London and Shanghai.
    She has a Bachelor's Degree in Economics and a Master's Degree in Financial Engineering and Risk Management from the University of Lausanne (HEC Lausanne), Switzerland.


    Advertising
    Advertising