US Markets Retreat After another Ratings Downgrade
US markets experienced another tough day after ratings agency Moody’s cut ratings on some smaller banks in the US and put some of the giants of the industry on review for potential downgrades. The major indices bounced back later in the day but still closed well in the red, the Nasdaq down 0.79%, the Dow 0.455 and the S&P 0.42%. Investors also negotiated more Fed chatter which was slightly less hawkish than earlier in the week but continued to emphasise the need for rates to remain elevated for longer. Treasury yields dropped but the dollar gained ground as the market digested the differing factors and prepared for further moves ahead of and after key inflation data releases.
Downgrades Threaten Stock Market Bulls
Yesterday’s bank ratings downgrade from Moody’s came swiftly on the back of fellow ratings agency Fitch’s downgrade of the US and although the market has recovered well in the latter stages of the day, longer-term investors may start to take note of what they being told on the foundations of the world’s biggest economy. Markets experienced huge volatility earlier in the year when several regional US banks collapsed and this put investors on alert for further disruption in the sector as higher interest rates cut into lenders’ balance sheets. Investors will be hoping that yesterday’s move is just a minor blip for the markets, but if the big boys are next in line, then there could be much more volatility in the next move.
Inflation Numbers Start to Hit the Market Today
Investors have been waiting for the first couple of trading days of the week for inflation data to hit and today sees the start of some major releases. First up in the Asian session, we have the release of the latest CPI and PPI numbers out of China, the expectation is for prints of -0.4% and -4.0% respectively. Later in the day, New Zealand comes into focus with the release of their quarterly inflation expectations. Once again, there is little due out on the event calendar in Europe and investors will look to the US session for more news hits the headlines and fixed income traders look at the key 10-year bond auction results.
