December 5, 2022
Markets on Edge as U.S. Stimulus Hopes meet Pandemic Resurgence

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On Thursday, global stocks were pinned down, as investors were waiting for US data that would offer clues regarding inflation and increasing pressures seen widely as pushing a scaling back of the giant stimulus packages offered by central banks. The Euro STOXX 600 remained flat and only regained a few slim losses, as 0.5% was added by French shares. Indexes in London and Germany had fallen by 0.1% and 0.3%, respectively. 0.3% losses in energy stocks were offset by the mining sector, which gained by 2%. A three-month high was achieved by British Bank HSBC, but it slipped into the red after announcing the exit from US retail bank for focusing on Asia. 

There were 0.2% losses seen in Wall Street future gauges. The US jobless claim and gross domestic product numbers were the focus that are due later in the day. Investors were also holding back on major bets as there will be a US personal consumption report disclosed on Friday. As per most investors, increasing inflation would push the Federal Reserve to discuss the option of tightening the monetary policy, albeit slowly. Experts said that they expected inflation to persist, rather than stay transient. This possibility boosted the US dollar, which has been shorted rather heavily recently. 

Still a number of players in the market remained bullish on equities, while shrugging off the inflation risks. This pointed to reopening of economies after lockdowns and lower volatility seen in the stock markets. Tracking shares in about 49 countries, the MSCI world equity index remained flat. Earlier, some of the losses were regained by the broadest index of the MSCI of Asia-Pacific shares, excluding Japan before it traded flat. Since last year, all major central banks have pumped trillions of dollars in a concerted effort to support the global equities market, while reiterating their stance of keeping interest rates low. 

This week, Richard Clarida, the US Federal Reserve Vice Chair, said that recent inflation pressures would turn out to be transitory. But, he did add that policymakers would discuss tapering in the future meetings. Randal Quarles, the Fed Vice Chair for supervisions, said that it will become essential for the US central bank to talk about tightening its asset purchase programme. The US dollar index remained steady at 89.958, holding onto the gains made on Wednesday, as talk about tapering remained on the agenda. 

As for the Chinese yuan, it reached a three-year high, with investors believing that Chinese central bank doesn’t have a problem with a stronger currency amidst the economic recovery of the country. Even though it had lost some ground a day earlier, the Euro moved up to $1.2206 once more after the announcement by Fabio Panetta, the Executive Board Director of the European Central Bank, about it being too early to talk about tapering their emergency bond buying scheme. As for the New Zealand dollar, it was below its Wednesday high at $0.7306, after the Reserve Bank of New Zealand hinted a possible rate hike in 2022. 


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