The collapse of world stock markets, gripped by fears that USA enter into a recessionseems to confirm a truth for investors: the US Federal Reserve (Fed) took too long to cut interest rates, thereby weakening the world’s largest economy.
He VIXknown as the Wall Street Fear Gaugeis trading at levels not seen since June 2020, while safe havens such as Treasuries and the yen are benefiting.
Jitters in global markets are causing investors to sharply increase bets on rate cuts by central banks around the world, Bloomberg reported.
At the start of the day, bets on the possibility of an emergency rate cut by the Fed were high. Federal Reserve were 60%. Since then, they have declined, but have not disappeared.
Investors now see a greater than 50% chance that the Bank of England cut rates in September, something that was considered a remote possibility after last week’s meeting.
While in the case of European Central Bank (ECB) They are projecting two cuts for October and are not far from leaning towards a huge measure next month.
The reaction of the world stock markets this Monday is a continuation of that of the markets on Friday after the data from employment in the United States, which showed an increase in unemployment, setting off alarm bells about the delay in the Fed in easing its monetary policy.
A cure worse than the disease?
Peter Kinsella, from UBPtold Bloomberg that an emergency rate cut by the Federal Reserve Not only is this an unlikely event, but it would also risk sending shockwaves through the entire market and increasing the sense of panic.
Bets on the possibility of an emergency rate cut have diminished as the day has progressed, but it remains one of the main topics of discussion.
The analyst Marcus Ashworth He also warned about the impact that such a measure would have, especially considering that the US central bankers met last week and passed up the possibility of making the cut as part of the monetary policy programme.
The fall in stocks is “a change of positioning “It is a market response, not a response to an economic shock,” he said. “There is nothing broken in the US economy, so there is no justification for monetary authorities to intervene and mitigate the losses of shareholders who are in a difficult situation.” over-indebtedness“, he added.
Source: Ambito
