Risk appetite witnessed a sharp decline during the last days of the week on Friday, amid recession fears raised by the very positive US data, especially the inflation data released this week, which led to increased expectations that the monetary tightening cycle may continue for a longer period than expected, as well as the concerns raised by it. China imposed severe sanctions on two of the largest military technology companies in the United States yesterday, and the following are the developments in risk appetite on the most prominent assets traded in the markets:
First: Risk Appetite and Stock Markets:
Global stock markets witnessed a sharp collective decline, on the back of heavy losses on Wall Street this week, amid growing global recession fears.
European stock indices witnessed significant declines, following the large losses in the Wall Street Stock Exchange, as investors feared the possibility of a recession in the economy amid the slow decline of recent inflation data.
At the same time, US stock index futures fell sharply during pre-market trading, as inflation data, retail sales and strong growth in the United States raised expectations that the US Federal Reserve may extend the monetary tightening cycle for a longer period than expected, and also reach interest rates. higher.
Higher than expected, and the return of the rise in core inflation further strengthened the market’s expectations that the US Federal Reserve may raise interest rates at a strong pace.
On the Asian level, the Japanese stock indices closed lower, due to the sharp losses in Wall Street, and the Chinese stock indices declined with the decline in risk appetite.
Second: Risk Appetite and the US Dollar:
The US dollar witnessed a strong rise of more than half a point during today’s trading, after the very positive data that was issued throughout this week and continued to support the strong rise of the green currency, and pushed it to its highest levels by about a month and a half, with weekly gains close to 1% so far.
The hawkish statements of US Federal Reserve members, following the higher-than-expected inflation data, prompted the rise of the dollar against all major currencies in the forex market.
Yesterday evening, US Federal Reserve member Loretta Mester called for raising interest rates at a higher rate at the next meeting, by 50 basis points, to control inflation and ensure that it is on a sustainable downward path. Federal Reserve member James Bullard also stressed the need to continue monetary tightening at a stronger pace.
On the other hand, Treasury bond yields rose strongly during today’s trading, as they rose by more than 1%, and US bond yields for 10 years rose by 1.18% to 3.89%, which increased the dollar’s profits.
Third: Appetite for risk and gold:
Gold incurred heavy losses during today’s trading, which pushed it to its lowest level since late last December, following the widespread selling of the yellow metal for the account of the US dollar and US Treasury bonds, as the sharp rise of the dollar increased the opportunity cost of possessing bullion priced in the US currency.
Fourth: Appetite for risk and oil:
Oil prices witnessed a sharp decline in trading today, amid fears that further tightening may cause a recession in the largest global economy and the largest oil consumer, and oil incurred more losses due to the strong rise of the dollar, which made oil priced in the green currency more expensive for consumers holding other currencies.
The statements of the Saudi Energy Minister yesterday evening also pushed oil towards a significant decline, as he confirmed that the OPEC + production agreement will remain in place until the end of the year, indicating that there is a high degree of uncertainty about the possibility of an increase in Chinese demand for crude.
The impact of risk appetite on currencies and commodities:
Risk appetite and the US dollar: The dollar index – which measures the performance of the US currency against 6 major currencies – rose by 0.50% to reach 104.60 points.
Risk Appetite and Gold: Spot gold prices fell by 0.44% to $1,828.29 an ounce, and bullion futures prices fell by 0.83% to $1,836.50 an ounce.
Risk appetite and oil: Brent crude futures prices fell by 3.01% to reach $82.72 a barrel, and West Texas Intermediate crude prices fell by about 3.06% to reach $76.05 a barrel.