Markets ended last week moving downwards and have started this week in a similar tone.
The S&P 500 was down -1.5% on Friday and now stands at its lowest level since November 2020. In European markets yesterday morning the STOXX 600 is down -0.7% and the FTSE 350 down -0.5%, both off initial lows.
In Asia the Hang Seng finished down -0.8%, although the Nikkei has bucked the trend and closed up +1%. Mainland China markets are offline for Golden Week holiday.
US futures are currently looking a little firmer.
Markets continue to remain in a ‘risk-off’ mode, as volatility intensifies and oversold conditions have not provided much support, as the focus instead remains on a relentlessly hawkish Federal Reserve and risk of a policy mistake, as growth headwinds multiply.
The main news flow once again centres around the UK with Prime Minister Truss and Chancellor Kwarteng being forced into a U-turn and no longer removing the 45% top rate of tax.
Meanwhile S&P has put the UK’s credit rating on “negative outlook” whilst retaining the AA rating for now.
Finally on oil, which was trading higher yesterday: according to delegates, OPEC+ are considering cutting output by more than 1m bpd when it meets on Wednesday. This would represent the biggest cut to output since the pandemic, reflecting producer concerns about a hit to energy demand from a rapidly slowing global economy. A cut of that magnitude is likely to reverberate given the Biden administration has been pressing for more output from Saudi Arabia while at the same time western allies are looking to cut Russia’s oil revenue. As such, the risk of a higher crude prices is likely to fuel concerns about inflation remaining higher for longer and in a deteriorating economic environment.