There market day It started with losses and nervousness. In Asia, all stock indices are closing the session in deep red, also shaken by plunge in the yen.
There risk appetite is under pressure and big tech companies have also been hit in recent trading in the US. The Micron Technology’s disappointing outlookdown 8% in the after-hours, triggered negative sentiment.
Also down futures on American and European stocks. In a context of strength of the dollarAsian currencies fell to their weakest levels in 19 months. The greenback, however, rose yesterday to its highest since November, on speculation that the Federal Reserve it will still maintain the gap with other central banks and leave interest rates high.
Strong dollar, jittery currencies and red stocks
The yen is stabilizing after yesterday’s drop to weakest level since 1986which has sparked fresh speculation that officials will step in to prop up the currency. However, it appears that the currency collapse it won’t stop until the Fed it will not give up its upward political path for a longer period.
The market is nervous about the sharp increase in volatility of the yen. Options show investors are demanding a premium to protect themselves from sudden moves and bearish bets on the yen are widening.
The intense buying interest for the greenback led the USD index to build on Tuesday’s gains and advance to multi-week highs above the 106.00 barrier on Wednesday, putting significant pressure on risk-sensitive assets and sending EUR/USD at new monthly lows close to 1.0660.
An indicator of emerging market currency fell to near its lowest in two months and that of Asian currencies slipped to levels last seen in 2022 as the dollar strengthened. Treasury bonds extended their recent declines on fears that Friday’s US PCE data show that inflation remains high.
“It all depends on the Fed: a higher level for longer means keeping rates very high, attracting money to the United States and keeping the dollar strong”said Andrew Brenner, head of international fixed income at NatAlliance Securities LLC.
Instability also came from tech stocks, the best performing and most attractive so far. Micron Technology collapsed after the computer memory chip maker forecast sales below some investors’ estimates. The news has dragged down some chip manufacturers including the giant Nvidia Corp.
The stock market relies too much on big technology according to David Bahnsen of The Bahnsen Group. “It remains to be seen whether the volatility last week in the tech sector whether or not the start of something deeper or whether a reckoning is coming, but excessive investor sentiment, euphoria and exaggerated momentum always end the same way.”he warned.
