EconomyThe markets live a black Friday in the face...

The markets live a black Friday in the face of greater risk aversion

The stock markets worldwide presented important negative movements, derived from the recent increases in the interest rate by various central banks, which has raised the concern of a global recession, in addition to the negative implications that this could have for corporate results. .

In the middle of the week, the Fed revised upwards its forecasts for the interest rate and lowered its expectations for economic growth in the United States. Among the highlights of those forecasts is that the central bank will be willing to slow the economy or even push it into a recession, with the goal of bringing inflation back toward its 2% target.

At the close of Friday, the Dow Jones recorded its fourth negative day with a decrease of 1.62%, reaching a level of 29,590.41 points, its lowest level since November 2020. The S&P 500 ended with a price of 3,693.23 units and a negative variation of 1.72%, while the Nasdaq fell 1.80% to end at 10,867.93 points, both indices recorded their worst level since last June.

In the weekly balance, the Dow Jones, S&P 500 and the Nasdaq decreased 3.99, 4.65 and 5.07%, respectively, which meant their worst variation for the same period since the second Friday of June.

Mexico’s indices followed the same trend as the global market. The S&P/BMV IPC ended at 45,401.14 points and a drop of 1.99%, while the FTSE BIVA closed down 1.98% at 949.62 units. For the weekly close, drops of 2.93 and 2.44%, respectively, were recorded.

“Market anxiety remained high as investors continue to process the implications of a week of tightening by central banks around the world and rising bond yields that are putting pressure on valuations. The S&P 500 retested its June low and European stocks fell sharply after weak eurozone data and a new UK economic plan added to inflation concerns,” said analysts at consultancy Edward Jones. .

In Europe, the UK government announced a tax cut plan to boost economic growth, sending the pound to 35-year lows. Among the incentives, he highlighted the cancellation of the increase in the tax on corporate profits from 19 to 25%. Following the announcement, eurozone stocks closed negative, with the FTSE 100 index falling 2.13%, the DAX down 2.46%; the Euro Stoxx 50, 2.49%; the CAC 40, 2.18% and the IBEX 35 lost 2.71%.

Analysts have mentioned that going into the last quarter of the year, they believe that inflation will be the main factor that will determine the direction of travel of the markets. Expectations have priced in a considerable amount of recession fears and what we saw today is likely to be closer to a bottoming out process.

“Every time we get a better-than-expected economic reading, traders anticipate that that will allow the Fed to be even more aggressive with policy tightening. A hard landing is becoming the base case for many and that means more economic trouble ahead along with a much weaker stock market,” said Edward Moya, Senior Analyst at OANDA.

Commodities under downward pressure

Oil prices fell this Friday about 5%, to an eight-month low, due to the fact that the dollar rose to a maximum of two decades and due to fears that the rise in interest rates will take the main economies of the world to a recession.

The price of Brent fell 4.21% to 86.62 dollars a barrel at 4:00 p.m. this Friday, while West Texas Intermediate (WTI) crude fell 4.93% to 79.37 dollars. Both finished with their lowest close since January of this year.

“The crude oil market is under strong selling pressure as the US dollar remains on a strong upward trajectory amid further reduction in risk appetite,” analysts at energy consultancy Ritterbusch and Associates said.

Gold fell 1.75% to 1,651.70 dollars per ounce, with a second consecutive weekly drop of 1.9%.

Industrial metals with significant declines. Copper closed the week down 4.46% to $7,518.00 per metric ton, while aluminum lost 4.92% to $2,165. Meanwhile, nickel and zinc lost 3.46 and 4.61%, respectively, and closed the week trading at $23,411 and $3,008 per metric ton.

The dollar hits a 20-year high.

At the close of the market, the dollar index (DXY) reached a level of 113.01 points, which meant its highest range since May 16, 2002. The US dollar reached a new high in 20 years against other major currencies supported by the risk-off sentiment and the rise in US yields this week.

For the local currency, there was a depreciation of 1.45% compared to Thursday’s close, with a price of 20.2324 pesos per dollar, according to data from the Bank of Mexico (Banxico). The weekly close ended with a depreciation of 0.74%.

Even with this devaluation, “during the week, the Mexican peso continues to be one of the most stable currencies, given the expectation that Banco de México will continue to adopt a restrictive stance on September 29,” said Gabriela Siller, director of analysis at Banco Base.

With information from Reuters

How would the elimination of daylight saving time affect the markets?

The elimination of summer time in Mexico does not affect the operations of the stock market, since the Stock Exchanges adjust their hours, opening and closing at the same time as the US Stock Exchange.

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