Home Economy The market storm is gathering momentum as virtually no asset class is spared

The market storm is gathering momentum as virtually no asset class is spared

by SuperiorInvest

TSX, S&P 500 taking hits as sell-off gets ugly

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Global markets came under more pressure on Friday as sentiment soured on the economic outlook around the world. Stocks, currencies, other asset classes – practically nothing has been spared in the economic cyclone that has been growing in recent weeks. Economists and analysts are watching this trading day:

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Markets in turmoil

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Indices fell across the board in Friday trading. The S&P TSX composite fell more than 2.5 percent to 18,516 in the first hour as energy shares fell to their lowest level in more than two months and oil prices gave up 6 percent.

US markets fared no better. The S&P 500 was down 1.7 percent at 3,692 by 10:40 a.m. CET and the Dow Jones was down 1.5 percent at 29,616. Goldman Sachs Group Inc. cut its target for the S&P 500 by the end of the year from 4,300 to 3,600, pointing to a shift in interest rate expectations and how they would affect stocks.

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Friday’s upheavals began in European and Asian markets.

“There is no risk appetite this Friday morning as shares across Europe are down as much as three percent, led by the FTSE MIB,” BMO economists Jennifer Lee and Shelly Kaushik said in a morning note. “Asia was not spared as the region was broadly sold off, with the Hang Seng down more than one percent while the CSI 300 held off losses of 0.3 percent.”

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Strategists at Bank of America Corp. point to a “cash is king” attitude among investors, showing the most pessimistic view of markets since the global financial crisis of 2008. Cash inflows hit $30.3 billion, while global equity fund outflows hit $7.8 billion, bonds lost 6, $9 billion and gold investment fell by $400 million in the week to September 21, according to the bank.

Canadian retail slump

The latest retail data from Canada was also a disappointment Friday, when sales fell 2.5 percent in July as lower gasoline prices contributed to the decline. While Canadians saved money for fuel, the cash windfall didn’t go to other retailers, Desjardins CEO and head of macro strategy Royce Mendes said in a note after the data. Mendes also said the slight rebound in nominal retail sales of 0.4 per cent that Statistics Canada estimates for August may point to higher volumes.

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“That means the trend is clear, consumers are spending,” Mendes said. “The slowdown in consumption is exactly in line with what the Bank of Canada is trying to achieve by raising rates.”

The Bank of Canada has aimed to bring high demand back into balance with tight supply by conducting an aggressive rate hike cycle this year that has so far raised the interest rate. three percentage points.

The pound is falling

Across the pond, the British pound fell two percent falling below $1.11 for the first time since 1985, adding to the pressures the currency faced earlier in the week. The drop came as newly appointed British Prime Minister Liz Truss introduced the country’s biggest tax cuts since the early 1970s.

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Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, he said that recent weak retail data has fueled fears of a deep and prolonged recession, adding to the pound’s woes.

The Bank of England raised its key interest rate by 50 basis points to 2.25 percent this week, which Schamotta noted before the decision would help widen interest rate differentials against the pound.

Don’t fight the Fed. Just no

US Federal Reserve Chairman Jerome Powell justified his Jackson Hole comments in late August by saying the central bank is willing to trade economic growth if it means curbing decade-high inflation. It showed the Fed raising 75 basis points earlier this week Powell was not bluffing, detailed economist David Rosenberg of Rosenberg Research & Associates Inc. caught on quickly.

“What part of ‘don’t fight the Fed’ do markets not understand?” Rosenberg wondered in his Friday morning letter to clients. “Chairman Powell’s message is clear: The Fed is serious this time, and it’s not bluff or bluff/fooling around.”

“Whether the Fed is ultimately right or wrong in what it’s doing, it wields a ‘magic lever,’ so investors should be prepared for further economic and market weakness,” Rosenberg added.

• By e-mail: shughes@postmedia.com | Twitter:

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