Risk aversion? Stock markets were wiped out gains

Risk aversion? Stock markets were wiped out gains | ZFX Daily News

Markets were all cautious

 

Shares in Asia-Pacific were nearly all bearish on Thursday, following the risk-off sentiment overnight on Wall Street. All three major indexes of Wall Street dropped sharply on Wednesday, all over 2% loss.

The Fed left its benchmark interest rate near zero and kept other policies unchanged, as widely expected, but traders felt like a bit negative towards about it. Some analysts believe that investors actually expected “more” from Fed and now the overall optimism in the market is faded out.

Today, European stocks are also trading lower as the sentiment remains gloomy.

When risk aversion comes back, concerns about like corporate earnings, the US stimulus, the pandemic and the delays in coronavirus vaccinations, etc, are all turning to be much “significant”. Until now, the US stock futures were still slightly lower.

Some other analysts warn that the retracement will be ongoing as the recent surge of the stock markets was just too much. It could be just a “over-bought” technical adjustment.

 

Greenback is back

 

The dollar extended gains on Thursday, and the dollar index is trading at 90.7 level, once touched the highest of 90.88 this week. Investors are now expecting that a breakthrough of 91 is reasonably possible, as the euro continues its weakness after an ECB member warned that interest rate cuts are possible.

Recently, ECB has expressed its concern again regarding the strength of the euro, implying some potential change of the monetary policy. Analysts said that as the euro is the biggest peer in the dollar index, the drop of the euro may also curb the other major currencies in the market.

On the other hand, the greenback, as deemed as the best safe-haven, got support while the stock markets are under correction, which is a very normal market pattern over these months. While investors are still betting on the long-term weakness of the dollar, short-covering in short-term may be far more realistic.

 

 

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