September 25, 2023

Investors Move into Riskier Tech, as Crude Hits $120

On Monday, Wall Street was on track for a strong opening, as the European and Asian markets reported gains. Investors appeared to be taking the expected hikes in interest rates in the future in stride, even though prices of crude oil shot up to $120 per barrel. S&P 500 futures and Nasdaq futures both saw gains of 1% and 1.4%, respectively. There was a 50% surge in US-listed shares in Didi Global, which is a ride-hailing company based in China. This happened after a report that Chinese regulators could be gearing up to list the app in their domestic app stores once more.

Thanks to this news, the Seng tech index in Hong Kong recorded gains of 4.6%. European stocks had a firm start from the get go with a 0.9% increase recorded in the STOXX 600 index. With meetings of central banks scheduled ahead in this week and the next, investors turned their attention towards riskier assets. They are hoping that the meetings will provide some clarity on how much slowdown can be expected in economic growth and whether inflation has hit its peak or not. On Thursday, the European Central Bank (ECB) will conduct its policy meeting, but it is not expected to announce a hike in interest rates.

That is expected in the next month, but investors do expect the central bank to announce the end of its bond-buying program in the said meeting. Likewise, the US Federal Reserve and the Bank of England (BoE) are also scheduled for their respective meetings next week. Up until now, there is still no certainty whether inflation has really peaked or not, which means that the Fed will continue to increase its interest rates for now. Officials of the central bank have already said that they will not halt the monetary policy tightening until they can see strong evidence of a slowdown in inflation.

There was also a 0.3% increase in the MSCI index, as it managed to hold onto its rebound. There are lots of bearish factors in the market that investors have to take into account. These include the Russia-Ukraine war, increasing interest rates, excessive inflation as well as a higher US dollar. But, the fact that they have turned towards risk-taking showed that they were in for the rewards, as the possibility was high. The S&P 500 has already seen negativity for about seven weeks out of a total eight, but it might be a good time to add risks to portfolios, if people already don’t have a lot of it in their portfolios.

The euro also managed to climb to $1.0724 at the prospect of the European Central Bank (ECB) putting an end to negative rates. This was a bit far-off from $1.0348, even though the currency has been struggling to move past resistance. The dollar had declined to 102 against a basket of major currencies and did not see any change after it had climbed up by 0.4% in the previous week.

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