US dollar rallies, Shares drop in a volatile start to the week

As global recession and inflation continue to rise, affecting rate-sensitive assets in the market. The bond yield increased, the dollar became stronger, and equity shares fell amidst relentless market pressure.

Among the major currencies, the maximum decline was in the pound. On Monday, it fell 4.7%, a record low, with the UK vowing to press on the tax cuts that threaten to fuel inflation. The fall of the euro was due to the impact of Italy weighing its outlook under a right-wing government, the first after World War II.

A global stock index traded at its lowest since 2020, while shares fell in Australia, Japan, and Hong Kong. Stock futures in the European and US market fell oil prices slumped on fears of lower demand due to the slow economy.

Edward Yardeni, president of   Yardeni Research inc., warned of a gloomy period with storm clouds over the US economy. He noted that the latest data scoff at the recession scenario, but the risk of full-blown recession is increasing.

The dollar index rose a high while the yen weakened but remained above the level after intervention from Japanese authorities.

Korea’s Won currency traded at its lowest level since 2009 amidst a continuous slide leading to the central bank warning of inflationary pressures. The Chinese Yuan edged close to the bottom edge of the trading band.

A senior Asian economist from Oxford Economics, Sian Fenner, told Bloomberg Television that while other currencies in Asia remained under pressure, the US dollar remained king.

The two-year treasury yield rose ten basis points to 4.3%, extending the worst slide. At the same time, the Sovereign debt of Australia dropped due to policy sensitive 3-year note. Bund Futures declined too.

Bond buying was boosted at the Bank of Japan, and the benchmarked 10-year yield bounced back to the upper end of the central bank trading range.

This week the trading will be impacted by a release of a number of economic data, including the gross- domestic product and US initial job data. The PMI figures from China will also be published. As several Federal Reserves officials will be speaking this week, prices are expected to remain choppy.

The Cboe Volatility Index, which represents the fear gauge of Wall Street, underscored market concerns after it jumped to a 3- month high Friday. Adding to the gloomy outlook, Goldman Sachs sharply revised its US stocks targets last week. It warned that a dramatic upward shift of interest rates would affect the stock valuations.

As recessionary concerns mounted, oil prices fell on fear of reduced demand. West Texas Intermediate fell 7% last week to $78 a barrel. Brent slipped for the first time since January, with the price going below $85.