US stocks are lower as the global growth picture takes a hit following key China Covid lockdowns and as the US economy could have to deal with a massive rail worker strike before the holidays. Adding to the risk aversion tone are rising concerns that future Russian attacks on Ukraine’s nuclear power supply could be catastrophic.
Wall Street is hesitant to buy up risk assets on this World Cup-filled and shortened holiday trading week as the first wave of headlines from Beijing to a rail union vote seem likely to further fuel inflationary pressures.
Trading activity could take a hit as many traders will enjoy focussing on the first round of games, but for now, it seems the pulse of Wall Street seems rather downbeat.
Rail/Shipping
The US economy is also in jeopardy of an unwanted supply-chain hit as rail workers appear poised to strike just before the holidays. After a key vote, it is looking less likely that we won’t see some possible work stoppages, which could prove to be terrible for economic activity and prove to be inflationary. If a deal is not reached early next month the hit to the economy could be over $2 billion a day.
China
Risk appetite vanished after deputy director of Beijing’s municipal Centre for Disease Control and Prevention Xiaofeng said, “The city is facing its most complex and severe prevention and control situation since the outbreak of the coronavirus.”
This Covid wave is troubling as it nears some of the more populous districts and that is forcing Beijing to tighten its rules. China also reported three Covid deaths over the weekend, which are the first deaths reported since May. It seems the zero-COVID policy is not going away anytime soon and that will definitely weigh on global growth.
FX
The dollar’s rally ran out of steam just as England’s World Cup campaign kicked off with a great start. The forex capital of the world, London, basically shut down for England’s impressive win against Iran.
China’s Covid struggles are driving strong safe-haven flows into the dollar. The risks to the global outlook might not be as bad as they were a few months ago, but that doesn’t mean this dollar rebound can’t go on for a little longer. The dollar might be able to remain strong here heading into the holiday weekend.
Crypto
The FTX aftermath continues and now everyone wants to know who are the unlucky creditors that will suffer big losses. According to court documents, it seems about $3.1 billion collectively is owed to one million creditors. Bankrupt Voyager Digital is also desperately trying to find a buyer and there is a lot of skepticism that Binance will not be able to get beyond all the hurdles that also include national security concerns.
Given the downbeat mood on Wall Street it comes as no surprise Bitcoin is lower. Bitcoin continues to stabilize above the $16,000 level despite a plethora of negative headlines. It seems something major needs to break for the sellers to take out the November lows. If the $15,500 level breaks for Bitcoin, there is not much support until the $13,500 level, followed by the psychological $10,000 level.
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Ed Moya
His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
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