The market is beginning to doubt whether eurozone inflation has peaked and the Ibex-35 loses another 1.9%, risking 7,300 points
The lifeline launched by the Bank of England on Wednesday with a new bond-buying program to avert financial instability in the UK was a mirage. The declines are returning powerfully in the stock market and the Ibex-35 chained its eighth straight session on Thursday. The selective exited another 1.9% and is delving into the lows of 2020 and was about to lose 7,300 points at the close.
The collapse of recent sessions shows the high level of nervousness investors are facing with the environment of high inflation and rising interest rates. The fear of a recession is felt on every trading screen and sell orders are imposed, filling the trading floors with red.
The largest declines in the Ibex 35 were presented by Meliá (-5.45%), Naturgy (-4.38%), IAG (-4.34%), Endesa (-3.8%), Red Eléctrica (- 3.46%) and Telefonica (-3.32%). On the positive side, the trading session is only in ‘green’ Sacyr (+1.39%), ACS (+0.13%) and Siemens Gamesa (+0.03%).
The rest of European equity markets also ended the day negative, with declines of 1.77% in London, 1.53% in Paris, 1.71% in Frankfurt and 2.4% in Milan.
Investors have welcomed CPI data in Germany, which jumped 10% in September, and hopes that the price hike has peaked has slumped. And all that just one day before the average data for the eurozone is out, which will undoubtedly mark the ECB’s next monetary policy decision.
The expectation of further rate hikes also prolongs a situation that is not very common in the markets, but which has become the daily bread for investors in these weeks of tension: the huge correlation between stock markets and fixed income.
At the same time as investors flee the stock markets, they are also selling government debt. And that price pressure drives up bond yields (which move inversely to price). For example, the yield on the 10-year German bond is again above 2.2%, while the US bond with the same maturity is again close to 4%, a threshold that it crossed a few days ago.
In the foreign exchange market, another major cause of instability in recent days, the euro and the pound are falling against the dollar again. Despite the intervention of the Bank of England to halt the fall of the British currency, the decline is repeated to USD 1,077. For its part, the euro remains far from parity at $0.9666.
Source: La Verdad