Markets week ahead: Dow Jones, S&P 500, USD, gold
After a week of mixed results, what can we expect for the last week of February?
What happened with the global markets?
Global market sentiment deteriorated this past week, setting traders up for volatility moving forward. On Wall Street, the Dow Jones, S&P 500 and Nasdaq 100 fell 2.61%, 2.94%, and 3.89%, respectively.
Across the Atlantic, the FTSE 100 and DAX 40 sank 1.57% and 1.76%, respectively. Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index fell 0.88% and 3.43%, respectively.
US economic events
Counter to the stock market, the US two-year Treasury yield soared to 4.82%, marking the highest confirmed close since 2007. On Friday, the US PCE Core Deflator crossed the wires higher across the board, pushing up hawkish Federal Reserve monetary policy expectations amid fears of stickier prices amid historically low unemployment.
Market pricing
Taking a closer look at market pricing, implied policy bets show that so far this month, traders have added at least two rate hikes to the outlook, with markets increasingly looking at a third.
This is a recipe for volatility going forward as bets of a pivot continue fading.
The US dollar
As a result, the US dollar rallied across the board. It strongly performed against the Australian dollar, Chinese yuan and EUR. Anti-fiat gold prices also took a thrashing, with XAU/USD sinking 1.73% last week. Gold is shaping up for a 6.14% drop this month.
That would be the worst decline over such a period since June 2021.
Week of 27 February
What should traders be watching going forward? From the US, we have ISM manufacturing and non-manufacturing PMI data due. For USD/CAD and AUD/USD, all eyes are on Canadian and Australian fourth-quarter GDP data, respectively. China will also release the latest official manufacturing PMI figures.
How markets performed – week of 20/02/2023
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