Stocks plunged to their lowest level since 2020 on Friday, continuing a slide seen since August, as investors in the United States and around the world grapple with an economic storm that is expected to continue to worsen. ”Write the Washington Post.
On Wall Street, the Dow Jones closed down 1.62%, while the Nasdaq lost 1.80%, in unison with all European markets, from Paris to Frankfurt, via Madrid and Milan – red lantern with a decline of 3.36%.
Investors’ concerns were heightened by the Fed’s – yet expected – decision this week to again raise its key rates sharply in an attempt to curb inflation. “The authorities’ determination to bring down inflation at all costs is fueling fears that this aggressive approach could cause a global recession”analyze the Financial Times.
Because the United States is not going it alone: the central banks of Indonesia, the Philippines, Taiwan, South Africa and Norway followed the Fed’s lead this week, confirming the global trend of policy tightening monetary.
Fall of the British pound
the dollar, “which tends to strengthen in times of uncertainty”, reminds the daily of the City, has meanwhile been propelled to a new high of 20 years against the euro. But the strength of the dollar “also rekindles fears of a slowdown in some developing economies, which will struggle to repay their dollar debts”observe the FT.
The situation in Europe, as evidenced by the fall in the stock markets, is hardly more enviable, remarks Five days. “Analysts consider the outlook for the Old Continent to be very negative, with rising inflation, central banks raising rates and an energy crisis threatening growth”writes the Spanish business daily.
Another worrying sign for Europeans, according to Politico : preliminary data published on Friday “suggest business activity in September experienced its worst contraction since early 2021”.
The British markets also had a trying day, after the announcement by the government of a shock recovery plan, providing in particular for historic tax cuts.
The decision greatly displeased investors and precipitated the fall of the pound, which hit its lowest level against the dollar in 37 years. So much so that the British central bank “has been urged to raise rates as early as next week, to prevent the pound from weakening further”reports the Daily Telegraph. This would be an exceptional step, knowing that the Bank of England has already raised its rates on Thursday in the wake of the Fed.
Even gold goes down
Fears of a global recession also sent oil down, as “an economic slowdown would also result in lower energy demand”explains the Wall Street Journal. The price of the benchmark American barrel thus closed on Friday below 80 dollars for the first time in more than 7 months, even before the invasion of Ukraine.
But the trend could be reversed. “Even with growing fears of a global recession in 2023, some traders believe oil prices could recover”writes the American business daily. “The European embargo on Russian oil is likely to cause Russian oil production to plummet, creating a vacuum in global supply. However, the extra production capacities of most Opec members are limited”.
Even gold, a safe haven par excellence, is no longer favored by investors: it has seen its price fall by 20% since the peaks reached last March. The fault of the greenback, analysis CNNbecause the market for gold and precious metals “is denominated in dollars. A stronger currency makes it more expensive for foreign investors to buy and can reduce demand, driving prices down”.