Global Stocks Slide As Dollar Continues Rising: Has The "Pricing In" Of Trump Begun
By Tyler Durden
While there was no unexpected overnight central bank announcement unlike yesterday’s surprise by the RBA which unleashed volatility havoc in the FX market, which promptly spilled over into all asset classes, overnight stocks around the world saw another leg lower without a tangible catalyst, while EM currencies fell to a one-month low after two Fed presidents raised concern investors had become too complacent in their belief that U.S. interest rate raises will stay on hold. Or perhaps all that is happening is that after ignoring Trump, the market is starting to finally price in the possible reality of the Donald in the White House (although as Jeff Gundlach pointed out, Trump would be a far better president for the economy and the market than Hillary or Bernie).
“Equity market sentiment seems to be rolling over globally as the wind begins to come out of the oil price rally,” said Angus Nicholson, market analyst at IG in Melbourne. “Given the move in commodity prices, the materials and energy sectors are set for a difficult session.”
The dollar has climbed against all its 16 major peers since Monday’s close as Atlanta Fed President Dennis Lockhart called a June rate increase “a real option,” while San Francisco’s John Williams said he would support such a move at the next meeting provided the U.S. economy stayed on track. While both are non-voting members of the Federal Open Market Committee, the outlook for Fed policy is under scrutiny with data on nonfarm payrolls due at the end of the week.
“While the probability of a hike next month is very low, I do think the market is underpricing the chances of a hike after that,” Michael Wang, a strategist at hedge fund Amiya Capital told Bloomberg. “And to that extent emerging markets may be vulnerable.”
As the chart below shows, the market is clearly unprepared for a rate hike and is pricing in a 90% chance of no Fed move next month.
As a result, stocks in Europe and developing nations fell for a fourth straight day while Asian shares have now fallen for the 6th session, their longest losing streak since the February lows. The dollar extended Tuesday’s recovery from the weakest level in almost a year, while Russia’s ruble tumbled the most in more than a week and Malaysia’s ringgit dropped to the lowest since March. After briefly bouncing on yesterday’s API inventory data, oil resumdes its decline before official DOE stockpile data scheduled for release Wednesday that’s forecast to show a fuel glut is expanding.
Europe’s Stoxx 600 Index was down 0.6% with all industry groups in the red. Anheuser-Busch InBev NV slid 3.1% after reporting sales and profit growth that missed estimates. BHP Billiton Ltd. tumbled after it was named in a $44 billion law suit over a dam rupture in Brazil that caused deaths and severe environmental damage. In the green were Siemens, Europe’s largest engineering company, up 0.6% and Societe Generale which rose 3.8% after both reported better earnings than analysts forecast.
The MSCI …read more
Source: Global Stocks Slide As Dollar Continues Rising: Has The "Pricing In" Of Trump Begun
