Germany GfK consumer climate survey; U.K. monthly automotive
manufacturing figures, Zoopla house price index; France consumer
confidence survey, housing starts; Italy consumer and business
confidence survey, industrial turnover; trading updates from
Frasers Group, ASML Holding
Shares in Europe may open lower Wednesday, extending losses from
Tuesday. Asian stock benchmarks were lower; Treasury yields rose;
the dollar rose; while oil and gold declined.
European stock could tumble at the open on Wednesday as
sentiment may be weighed by overnight declines on Wall Street and
persisting concerns about a deteriorating economic outlook.
U.S. stocks closed lower Tuesday, with both the Dow industrials
and the S&P 500 falling as investors parsed a spate of economic
data and comments from Federal Reserve officials.
Market analysts attributed stocks' woes to higher Treasury
yields and the stronger dollar, which have become major bugbears
for the market. They also blamed a batch of unexpectedly strong
economic data, which helped reinforce the notion that "good news"
for the U.S. economy is once again "bad news" for the market.
A sharp rise in interest rates has been weighing on stocks, said
Mimi Duff, managing director at GenTrust. "I think we need to start
seeing the rates stabilize before we can bottom out in equities,"
Joe Saluzzi, co-head of equity trading at Themis Trading, said
he expected stocks to remain under pressure for some time.
"There's just no conviction in this market," Saluzzi said.
The dollar strengthened in Asia amid higher Treasury yields,
which enhance the appeal of USD-denominated fixed-income
Soaring yields sent USD higher and have continued to put
pressure on equities, CMC Markets said.
A slew of Fed officials continued to back "higher for longer"
rates to curb inflation, while U.S. economic data such as new home
sales were stronger than expected, CMC said.
Sterling remains exposed despite a modest recovery from heavy
losses following Friday's controversial UK government budget
statement, Rabobank said.
The currency's gains on Tuesday suggest the extreme cheapening
of UK assets in the past couple of sessions is attracting some
interest, the Dutch bank said.
"That said, the causes of the sell-off in both gilts and in GBP
haven't been addressed and this suggests the pound remains an
extremely vulnerable currency,"
Rabobank said, adding that rising interest rates and prices
threaten to offset any benefits from new UK prime minister Liz
Truss's tax breaks.
"Already speculation is emerging [Truss] may not be able to hold
onto office for very long," said Rabobank. "Political uncertainty
in itself is a negative currency factor."
Bond yields were higher early Wednesday.
"Bond yields continue to push higher on expectations of further
central bank tightening," according to UBS Global Wealth
"Rising yields in part reflect the unwinding over the last month
of expectations for an early pivot in central bank, and
particularly Federal Reserve, policy. But we think the rise in
longer-term yields may not accurately reflect the risks facing the
Read: Why a rising 10-year Treasury yield is rattling financial
markets as it nears 4%
Oil futures fell in Asia amid USD strength, though losses may be
limited by Hurricane Ian's approach in the U.S. The hurricane is
causing disruptions to offshore oil and gas production in the U.S.
Gulf of Mexico.
The recent oil selloff could prompt OPEC+ to curb output when
they hold their monthly meeting on Oct. 5.
"The group will likely be getting uneasy with the degree of
weakness that we have seen in the market and so there is the very
real possibility that we see OPEC+ announce supply cuts in order to
support the market," ING said.
"Clearly though, if we are to see cuts, they will need to be
quite a bit larger than the 100,000 barrels a day agreed at the
last meeting in order to have a meaningful impact on the market,"
Still, overall, "oil remains a sellers' market with worries
about a global recession and high interest rates intensifying,"
said Fawad Razaqzada, market analyst at City Index and
Gold prices edged lower in choppy trade.
"Gold won't bottom out until Wall Street feels they have a firm
handle on how rates will go and right now it seems rates will need
to quickly get above current CPI levels," Oanda said.
Gold "remains under the mercy of a broadly stronger dollar and
rising Treasury yields amid [Federal Reserve interest] rate hikes,"
"We may see high levels of volatility for gold over the next few
days as the markets digest the flurry of speeches by numerous Fed
Aluminum prices declined in Asia, extending a broad downturn
marked over recent weeks as high interest rates weighed on
Haitong Futures expect the base metal's prices to continue
fluctuating in the near term, given a mixed bag of positive and
While global macroeconomic conditions could curb traders'
appetite for risk assets like commodities, Haitong said China is
experiencing an aluminum supply shortage due to producers' output
cuts, which could help support the metal.
Chinese iron-ore futures rose slightly, continuing the trend of
rangebound trading in recent sessions.
Although prices have been supported by restocking demand ahead
of China's National Day holiday in October, iron-ore imports could
pick up in the coming months and put pressure on the raw material,
Donghai Futures said.
TODAY'S TOP HEADLINES
Kashkari Says Fed Needs to Keep Tightening Until There's
Compelling Evidence of Declining Inflation
Federal Reserve Bank of Minneapolis President Neel Kashkari said
the U.S. central bank needs to tighten monetary policy until
underlying inflation is declining, and then wait to see whether it
has done enough.
"The one mistake that I'm acutely aware of-that I want to avoid
repeating from the 1970s-is when policy makers saw the economy
weakening, saw inflation start to tick down, and then they cut
rates, thinking they had done the job. And then inflation flared
back up again-that, I believe, is a mistake we cannot make and will
not make," Mr. Kashkari said Tuesday during an online event hosted
by The Wall Street Journal.
China's Offshore Currency Hits Record Low Against Dollar
China's currency hit its weakest ever offshore trading level
against the U.S. dollar, with the yuan falling below 7.2 to the
dollar for the first time since a separate system for trading the
currency outside mainland China was launched more than a decade
The move caps a fall of about 12% for the offshore yuan against
the dollar this year and comes despite repeated attempts by China's
central bank to support its currency. The U.S. dollar has gained
against currencies around the world amid a campaign of aggressive
interest rate increases by the Federal Reserve.
U.K. Seeks to Calm Investors Over Clash Between Inflation Fight
and Truss Tax Cuts
The U.K. government, after a punishing week for the pound and
bond market in London, tried Tuesday to reassure investors that it
is working to better coordinate with the Bank of England as Prime
Minister Liz Truss's tax cuts and energy subsidies complicate
efforts to control spiraling inflation.
U.K. Chancellor of the Exchequer Kwasi Kwarteng said he was
meeting Bank of England Governor Andrew Bailey daily.
U.K. Market Turmoil Ripples Into Home Loans
LONDON-Some British banks paused new mortgage lending Tuesday,
the latest fallout from market turbulence fueled by the new
government's plans for sweeping tax cuts and energy subsidies.
At least six mortgage lenders stopped offering some loans, or
briefly halted lending to home buyers altogether, according to UK
Finance, an industry trade group.
U.S., Europe Prepare New Sanctions on Russia After Kremlin's
The U.S. and European Union are poised to adopt new sanctions on
Russia, though some EU members are questioning existing
restrictions and the economic pain in Europe is growing.
The European Commission, the EU's executive body, is likely to
propose new import and export controls on Russia as soon as
Wednesday, according to officials involved in the talks, including
an import ban on some Russian diamonds. It will also propose
placing additional Russian officials and pro-Kremlin separatists on
its sanctions list in the coming days, in a modest new package of
measures to increase pressure on the Kremlin.
Meta Shuts Down Influence Operations Started in China,
Meta Platforms Inc. said Tuesday that it has removed separate
networks in China and Russia that were running covert influence
campaigns related to U.S. politics and the war in Ukraine.
In a post on its blog, the Facebook parent company said it has
taken down a small network that originated in China and operated
across multiple social media platforms, targeting U.S. voters on
both sides of the political spectrum ahead of the 2022 midterm
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Expected Major Events for Wednesday
06:00/DEN: Aug Retail Sales Index
06:00/GER: Oct GfK consumer climate survey
06:00/SWE: Aug Retail sales
06:00/NOR: Aug Retail Sales
06:45/FRA: Sep Consumer confidence survey
06:45/FRA: Aug Housing starts
07:00/SVK: Aug PPI
07:00/SWE: Sep Monthly Business Tendency Survey
07:00/SWE: Sep Consumer Tendency Survey
08:00/ITA: Sep Consumer Confidence Survey
08:00/ITA: Sep Business Confidence Survey
08:00/ICE: Aug PPI
08:00/AUT: Sep Austria Manufacturing PMI
08:00/ICE: Sep CPI
08:30/UK: Aug Capital issuance
09:00/ITA: Jul Industrial turnover & orders
10:00/IRL: Aug Retail Sales Index
23:01/UK: Aug Zoopla House Price Index
23:01/UK: Aug UK monthly automotive manufacturing figures
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(END) Dow Jones Newswires
September 28, 2022 00:18 ET (04:18 GMT)
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