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Stock market: crisis in Italy, recession in the USA, new rate hike by the FED and a first for the ECB, the markets euphoric in the face of so much bad news

Stock market: crisis in Italy, recession in the USA, new rate hike by the FED and a first for the ECB, the markets euphoric in the face of so much bad news


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Always take investors on the wrong foot!

Since the seizure of algorithmic trading on the financial markets, the evolution of the financial markets almost systematically takes investors on the wrong foot. Bad news piling up? The stock market is going up. A sign of calm and good signs, the market is falling. A flood of bad news, the market falls even harder… In short. No rational trend, just short term speculation.

Recession in the USA

On the side of the pros, at Saxo Bank, nobody ignites. Market sentiment was relatively buoyant on Friday as long-term inflation expectations were revised down following the Michigan index, but that did not alleviate concerns about a downside risk. economy still very present. The probability of a recession in the United States is now 47.5% against 30% in June. The markets have been trading without any real direction for several weeks as investors are extremely divided between the fear of missing a strong rebound and fears around the economic and political environment which could lead the main indices to new lows. The results season coupled with the FED meeting at the end of the month will be the triggers for a more marked directional.

Rebound in financial markets

Wall Street should open higher on Monday, European stock markets rose mid-session while the dollar is down with the prospect of monetary tightening a little less aggressive than expected in the United States. Futures on major New York indices are signaling an opening up 1.06% for the Dow Jones, 1.04% for the Standard & Poor’s 500 and 1.25% for the NASDAQ. In Paris, the CAC 40 gained 1.52% to 6,127.89 around 11:45 GMT. In Frankfurt, the Dax is up 1.43% and in London, the FTSE is up 1.28%.

Fed rate hike

Overall, market sentiment continues to benefit from the prospect of a Federal Reserve rate hike of “just” 75 basis points at its July 27 meeting, as U.S. central bank officials said voiced their opposition to a bigger hike last week despite accelerating inflation.

ECB rate hike

On Thursday, the European Central Bank is expected to kick off a rate hike cycle, starting with a quarter-point hike. Observers will also be very attentive to the characteristics of the anti-fragmentation tool that will be presented to alleviate the pressure on the borrowing costs of the most indebted members of the euro zone.

This new instrument will have to be effective, while being proportionate and containing sufficient safeguards to maintain Member States’ momentum towards a sound fiscal policy. Whether the consensus within the Council is strong enough to provide sufficient firepower to defend this level and reduce the risk of financial fragmentation remains to be seen.“, said Alexandre Hezez, strategist of the Richelieu Group with Reuters.

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