Concerns over the recession in the West are squeezing the stock market-April 6, 2022 18:30

The stock market fell sharply on Wednesday in anticipation of a US recession due to monetary tightening, but also fell in Europe when Russia’s gas embargo was announced.

The European stock market, which expanded its losses throughout the day, fell sharply. Paris was down 2.21%, Frankfurt was down 1.89% and Milan was down 2.06%. The French and Italian markets fell 3% only temporarily. London lost 0.34% in some of them.

The New York Stock Exchange has also fallen. At around 4:10 pm GMT, the Dow Jones yielded 0.60%, the S & P 500 yielded 1.16%, and the Nasdaq yielded 2.41% in strong technical colours.

The market is pricing a tighter tightening than expected from the US central bank after Federal Reserve Governor Lael Brainard made a tougher comment than expected on Tuesday.

Lael Brainard ensured that the Fed is ready to “act more strongly” against inflation at its next financial conference in May, especially by selling financial assets.

With this aggressive monetary tightening outlook, Deutsche Bank analysts fear a recession in the United States by the end of the year. “And not just them, many economists have this vision,” asserts Philippe Cohen, portfolio manager at Kiplink Finance.

The minutes of the final meeting of the financial institution’s Monetary Policy Committee, expected after the European market closes, will allow market players to know more.

On Wednesday, members of the European Central Bank (ECB) warned that monetary tightening in the euro area could weigh on already weakening economic activity.

European operators are even more concerned about the current debate between European Union countries on new sanctions on Russia regarding coal and its investment in the country. The United Kingdom and the United States have announced new economic and financial measures.

According to Philip Cohen, market concerns are, among other things, the suspension of Russian gas and oil imports, which “will be unbearable for the economy.”

But for Michael Hughson, “too much pressure is only a matter of time”, especially when “new evidence of atrocities committed by Russians” arises, countries that are still reluctant to do this. Give in. Russia has been accused of abuse of civilians, especially in the town of Butcha near Kyiv.

European Council President Charles Michel said Wednesday that the EU should “sooner or later” impose sanctions on Russia’s oil and gas.

Rising rate and falling technology

In the bond market, rising interest rates have responded to this situation as a whole. The 10-year US loan was 2.599%, the highest since 2019. Interest rates in Europe have also been tightened significantly, reaching 0.644% in Germany’s decade.

Technology stocks that require low interest rates to assess growth capital and long-term earnings have fallen.

In New York, giants such as Meta (-2.65%) and Amazon (-2.92%) were all in the red. In Europe, Teleperformance (-4.53%), Darktrace (-1.55%) and HelloFresh (-9.46%) were also affected.

More blatantly, semiconductor manufacturers suffered from international tensions and restrictive measures in China. Infineon fell 3.78% and STMicroelectronics fell 2.77%. Nvidia lost 6.12% and AMD lost 3.39%.

The ruble eliminates that loss

Crude oil prices plummeted after a significant unexpected increase in US crude oil inventories.

WTI’s barrel at maturity in May was below $ 100, down 2.88% to $ 98.98. The European benchmark North Seabrent fell 2.20% to $ 104.29 in May delivery around 4 pm GMT.

In the currency market, the ruble returned to a temporarily closed level on February 23 (81.16 rubles per dollar) before Russia invaded Ukraine. It was trading at 82.1933 rubles per dollar around 4 pm Greenwich Mean Time.

The euro remained vulnerable to the greenback that was booming this week due to Fed policy (+ 0.07% to $ 1.0912).

Bitcoin fell 3.62% to $ 44,215.