Before the start of yesterday’s session, it was difficult to find arguments for a rebound in the markets and it turned out that European markets started to sell off from the start of the day, despite starting just below neutral levels. The final assessment of the day is a drop of 2.15% (DAX) to 2.90% (Stoxx 600) of the main indices, reinforced in the last hours of trading by the continued collapse of Wall Street. WIG20 fell by 2.14%, mWIG40 by 1.54% and sWIG80 by 1.22%. The turnover on the WSE did not exceed 850 million PLN, which could announce the end of the sale. KGHM was again the leader of the decline (-6.1%), but also banks (-2.79%), which lost almost a third of their value at the sector level, also continue to decline . On the positive side, only the price increase of Allegro (+1.57%) can be mentioned, which is a potential signal in such a difficult environment that the company reached a local low on Friday.
The S&P500 fell 3.20% yesterday and the NASDAQ 4.29%
It’s hard to describe the session as anything other than a complete capitulation of the US stock market. In the context of yesterday’s events, the warning that market liquidity is deteriorating in the Fed’s Financial Stability Report seems like a huge understatement. At the same time, we think yesterday’s session brought us a lot closer to finding the extreme local. First, the collapse eventually sparked a flight of investors to Treasuries, the yield on US 10-year bonds fell from 3.2% in the early part of the day to 3.03% by the end of the day. fencing. Oil played an important role in this behavior – its prices above 110 USD/barrel played an important role in our pessimistic attitude yesterday. Reports that, following objections from several EU members, mainly Greece, the EU will withdraw its plan to ban the transport of Russian raw materials by vessels flying the flag of EU countries, however, have become a pretext for a strong sale of raw materials, the largest in 5 weeks. The key factor in its magnitude, however, is that we have reached the point where headlines show that a bear market and recession are almost inevitable.
We also view yesterday’s crash in cryptocurrencies as a signal that the selloff will end soon.
Double-digit declines in the largest of these, including bitcoin, complete yesterday’s picture. The most controversial asset class, which has recently been extremely correlated with the NASDAQ, nevertheless remained surprisingly resilient to the bursting of the COVID bubble. Year-to-date discounts of 20-50% may impress other investors, but they certainly do not cause mass outflows of cryptocurrencies, which for four months of the year looked no worse than other areas of the technology sector.
Monday’s acceleration in declines was likely caused in large part by the collapse of the algorithmic stablecoin TerraUSD, whose price at the height of the panic fell to 69 cents, more than 30% below the theoretical value. The capitalization of TerraUSD was “only” 18 billion dollars, but the link with Luna, one of the top 10 cryptocurrencies yesterday, and the actions taken by the founder of the project and the users (sale of Bitcoin and of Ethereum to stabilize the price) show how easily this market could implode in a crisis of confidence in Tether or Binance Coin. Cryptocurrencies still appear to be in the early stages of the bubble bursting, while their further ‘hanging on’ on the sell could be a signal that the stock market is close to a local low. .
Asian markets are behaving surprisingly today,
grows, among others the Shanghai Stock Exchange strongly reflects the performance of US index futures. Of course, the pattern that morning brings hope for highers and evening for deeper declines has been painfully practiced by investors in recent weeks, while today the odds of a shift in sentiment seem quite high. . However, for a real breakthrough, tomorrow’s good US inflation data will be needed.