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KEY MARKET DEVELOPMENTS:
- U.S. stocks plummet on risk-off sentiment, Nasdaq 100 down as much as 2%
- Growth-related commodities such as oil and copper are also growing fears of a recession
- Risk appetite dominated Thursday’s price action. Investors are increasingly concerned about a hard landing for the U.S. economy amid tightening financial conditions. Disappointing corporate earnings and poor earnings forecasts from major U.S. banks such as JPMorgan and Morgan Stanley added to the negative sentiment, but the bad news didn’t end there. Expectations that the Federal Reserve will raise interest rates by 100 basis points at its July meeting have worsened conditions in risk assets after a disastrous inflation report in June deteriorated.
Against this backdrop, U.S. stocks were markedly lower late in the morning, with the Nasdaq 100 down about 2%. Growth-related commodities also suffered amid fears that a sharp slowdown would dampen demand for the commodity and weigh on its prices in the quarters ahead. On a related note, copper and oil prices are down more than 3% at the time of writing.
USD rebounded across the board, EUR/USD briefly fell below parity
Most Read: US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/CAD, USD/JPY
Risk appetite dominated Thursday’s price action. Investors are increasingly concerned that the U.S. economy is headed for a hard landing amid tightening financial conditions. Disappointing corporate earnings and poor earnings forecasts from major U.S. banks such as JPMorgan and Morgan Stanley added to the negative tone, but the bad news didn’t end there. Expectations that the Fed will raise rates by 100 basis points at its July meeting after a disastrous inflation report in June worsened risk asset conditions.
Against this backdrop, U.S. stocks traded sharply lower late in the morning, with the Nasdaq 100 down about 2 percent. Growth-related commodities also suffered amid fears that a sharp slowdown would dampen demand for the commodity and weigh on its prices in the quarters ahead. In this regard, copper and oil prices have fallen by more than 3% at the time of writing, prolonging their sell-off.
Meanwhile, the U.S. dollar rose across the board amid a risk-off in all markets, with the DXY up about 0.9% to 109.00, its highest level since September 2022. EUR/USD dipped below par, briefly as low as 0.9952, before stabilizing around 1.0000 as traders sold off heavily in high beta currencies.
Looking ahead, recession fears aren’t fading anytime soon; in fact, jitters are likely to increase in the coming days as U.S. companies release financial statements for the current reporting period. Quarterly results and forward-looking comments are likely to continue to beat expectations and reinforce the notion that the U.S. economy is in trouble. In this environment, risk assets could struggle, while the dollar could gain the upper hand, especially as volatility rises.
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