Home » Market Daily Watch » Markets Update – TradexSys DailyWatch – 20/10/2023

Markets Update – TradexSys DailyWatch – 20/10/2023

Good morning, on Friday, October 20th, we witnessed the second consecutive day of declines in the world’s major financial markets. The S&P recorded a loss of 0.85%, the Dow Jones 0.75%, and the Nasdaq 0.85%. Asian markets also followed the same trend, with the NIKKEI down by 0.54% and Hong Kong by 0.72%, while the Dax mirrored the negative trend in Europe. This morning, the situation remains unfavorable, with volatility remaining above 20 points. American market futures are also in decline, with all three in negative territory.

The primary cause of yesterday’s negative market performance was attributed to geopolitical tensions originating from the Middle East. Additionally, statements from the Federal Reserve’s President, Jerome Powell, contributed to market influence. Powell stated that lower economic growth and a slowdown in the labor market are necessary to achieve the medium and long-term inflation target of 2%. Despite clear progress in inflation, which dropped from 9% in June 2022 to 3.7% in the latest data from September 2023, Powell emphasized that the path is not yet complete. He clarified that it is essential for the labor market to weaken slightly and for economic growth to slow in the coming months.

When asked if he believed that monetary policy was too restrictive at this time, Powell responded negatively. This had a negative impact on the stock markets, causing an increase in yields on three-year government bonds, which reached a new record in the past 17 years, briefly exceeding 5%. Currently, the yield has fallen to 4.93%. This increase in yields offers an attractive investment alternative for investors, which penalizes the stock market. Volatility in long-term government bonds continues to concern investors.

The future behavior of the stock market will largely depend on the performance of government bonds, particularly a retracement of yields on ten-year and two-year bonds to lower levels, allowing American stock markets to recover. Additionally, today we are waiting for updates on the earnings of major companies, with American Express being the only significant note.


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