After the November rally, investors cash in. But even the recent robust economic data give the Fed little reason to back away from its tight interest rate policy. Investors are increasingly turning to the bond market again.
On the US stock markets, concerns about an aggressive interest rate policy by the US Federal Reserve determined trading at the beginning of the week. New economic data confirmed the strength of the US economy, which puts the central bank under pressure. Both the ISM index for the service sector and the order intake in industry were above expectations. The sub-index of prices at the ISM also exceeded forecasts. So, despite recent rate hikes, the US economy is booming. The Dow Jones index lost 1.4 percent to 33,947 points. The broader S
But the markets were due for losses anyway, said David Kelly, Chief Global Strategist at JPMorgan Funds: "The November rally, in which both equity and bond prices rose, was enough in itself to prevent a setback like today to make inevitable".
At the end of the previous week, US labor market data, which were significantly better than expected, unsettled investors and fueled concerns about the US Federal Reserve's continued tight interest rate policy. However, there is still around a 75 percent probability of a US interest rate hike of 50 basis points and not around 75 basis points in the coming week.
On the FX market, the dollar index was firm on the strong US data. He gained 0.8 percent. Oil prices turned sharply lower after the dollar strengthened significantly. In addition, the good economic data raised concerns that the Fed raising interest rates could reduce demand for oil. Prices fell by around three percent.
On the bond market, yields recovered from the losses, also fueled by the strong economic data. The 10-year yield rose 9.9 basis points to 3.59 percent. Gold prices fell significantly as bond yields rose. The price of the troy ounce was 1.6 percent lighter.
Tesla fell 6.4 percent among the individual values. The US electric carmaker's stock reacted to agency reports that production at its Shanghai plant is set to be reduced due to falling demand. Tesla denied the reports. Fox reported on Sunday that Switzerland could ban electric vehicles due to power shortages.
Apple shares lost 0.8 percent. In recent weeks, Apple has accelerated plans to move some of its manufacturing out of China, insiders told The Wall Street Journal. The company has urged its suppliers to plan more actively the assembly of Apple products in other Asian countries, particularly India and Vietnam, and reduce dependence on Taiwan's assembly plants led by Foxconn Technology, the company said. The Foxconn plant in Zhengzhou, China, was rocked by violent protests in late November.
Salesforce plummeted 7.4 percent. Stewart Butterfield, CEO and co-founder of communications service Slack Technologies, plans to leave the company. Salesforce acquired Slack in 2020.
