Thump for Wall Street. The Dow Jones closed down 2.41% at 29,929.31 points, the Nasdaq dropped 4.08% to 10,646.10 points while the S&P 500 left 3.24% at 3,667.24 points. A recession “is not inevitable”. This was stated by the American president Joe Biden to the Associtaed Press, as reported by the Bloomberg agency. The recession “is not inevitable” and “we are in the strongest position of any other country in the world to overcome inflation,” Biden said with the Associated Press, stressing that his optimism is linked to an unemployment rate of 3.6 % and America’s Strength in the World Joe Biden admits he is aware of Americans’ frustration with Covid and inflation. “I’m very, very down,” says the US president, calling “bizarre” the notion that the aid plan launched for the pandemic has caused inflation.
The sigh of relief did not last long. The Fed’s greater squeeze since 1994 and the skepticism of the ECB’s anti-spread shield sink the stock markets which, after the rebound on Tuesday, come back under pressure with the resurgence of the specter of recession. The European financial centers they close in sharp decline and they see go up in smoke 233 billion.
In the Old Continent Milan is black jersey closing in 3.32% drop and burning beyond 21 billion. Behind Frankfurtwho lost the 3.31% weighed down by tensions on German government bonds, which rose by 20 basis points, so much so that it fell spread between 10-year BTPs and Bunds below the psychological quota of 200 points (up to 196) and then closed at 202 points.
French bonds are also under pressure: those at five years have risen by 16 points. Above all, the markets are nervous about skepticism about the ECB’s measures, which are being worked on with many problems to resolve, including that of the power of the new anti-spread shield and the possible conditions for the beneficiary countries. “They have a plan to develop a plan, but the market wants more details,” says Hsbc’s Willem Sels. “It is a good thing that the ECB reacted but there is nothing new”, adds Hadege Dufosse of Candriam.
To the doubts about the Eurotower are added the fears of a Fed that is too aggressive. The historic hike in interest rates of 0.75% to fight a galloping inflation feeds the fear of a recession, now almost taken for granted in the United States where the chances are now given at 72%. The Bank of England is also adopting a ‘hawk’ strategy, which has further raised the cost of money by a quarter of a point, warning of a possible price flare above 11% by the end of the year. The cost of living also pushes the Swiss central bank into action which, surprisingly, raises rates for the first time in 15 years, adjusting the cost of money by 0.50%. Markets inevitably watch this run by central banks into new straits with concern, fearing its effects on the economy. Indeed, the rises threaten to stifle the recovery by sliding the global economy into a recession without having the certainty, beyond public proclamations, of being able to win the fight against inflation.
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