Polish Deaths Scare Investors

Polish deaths scare investors despite the rise in global stocks.

The Dow Jones Industrial Average climbs 0.17% on Tuesday, November 15, after a brief dip due to the killings in Poland. The S&P 500 rises 0.87%, while the Nasdaq Composite rises 1.45%.

On Tuesday, November 15, stocks rallied and the dollar sank after statistics showed that US inflation had peaked, but markets were startled by media claims that Russian rockets killed two people in Poland, raising worries of an escalation in the Ukraine war.

According to Reuters, two persons were killed by fire in an eastern Polish village near the Ukrainian border. Other news outlets said that the casualties were caused by the heaviest Russian missile strikes on Ukraine since the conflict began.

The White House said it couldn’t corroborate the reports, which Russia’s military ministry called “an intentional provocation aimed at aggravating the situation.”

According to Marc Chandler, chief market analyst at Bannockburn Global Forex in New York, the market was overstretched after the first reports of the Polish killings, and the dollar briefly strengthened as statistics suggested inflation was coming off its peak.

He compared the Polish killings to the 1999 US bombing of the Chinese consulate in Belgrade, which killed three people.

“It did not start a war. It was a terrible accident. This is along those lines,” Chandler explained.

Stocks rose and bond yields fell further after the Labor Department reported that producer prices in the United States climbed by only 0.2% in October.

The producer price index increased 8% year on year after rising 8.4% the prior month. Reuters polled economists predicted a 0.4% increase in monthly PPI and an 8.3% increase year on year.

The result was better than expected, bolstering the risk-off sentiment that had been ignited last week by lower-than-expected data on US consumer prices, which gave investors hope that the Federal Reserve would soon reduce its aggressive interest rate hikes to manage inflation.

“The market is sensing the conclusion of the Fed rate hiking cycle,” said Peter Duffy, a chief investment officer of credit at Philadelphia-based Penn Capital Management Company LLC.

“The market is breathing a sigh of relief because the Fed has had to speak so forcefully.” The market will be relieved as soon as these statistics begin to fall, even if it is a slow walk down in inflation.”

Fed funds futures fell further from last week’s projection of the US central bank’s target rate above 5%. The market is currently pricing in a peak of 4.9% in May and June of next year, followed by a dip to 4.39% by year’s end on anticipation that the Fed will lower rates.

The chance of the Fed raising interest rates by 50 basis points in December has risen to 93%, up from 71.5% last week.

MSCI’s global stock index jumped 1.03%, while its emerging markets index rose 2.22%.

The Dow Jones Industrial Average climbed 0.17% on Wall Street after stumbling on the Polish tragedy. The S&P 500 increased by 0.87%, while the Nasdaq Composite increased by 1.45%.

Big swings in the dollar, among other assets, suggested that investors were drastically shifting their positions following the CPI and PPI readings, according to Chandler. It will take time to obtain a clearer understanding of inflation and the Fed’s policy goals, according to Duffy.

The euro was up 0.22% to $1.0348 after momentarily falling on the Polish data, and the yen was up 0.50% against the dollar at 139.18.

The benchmark 10-year Treasury yield dropped to a six-week low of 3.758% before falling 10.1 basis points to 3.766%. Since Thursday, November 10, the 10-year has dropped 30 basis points.

Chinese and Hong Kong markets rose overnight as investors absorbed China’s COVID-19 policy changes, a property sector bailout plan, and an easing of US-China tensions.

The Hang Seng Index in Hong Kong rose 4.11% overnight. The index is up roughly 25% for the month, while China’s CSI 300 is up 10%.

On the margins of the G20 summit, US President Joe Biden and Chinese President Xi Jinping met for three hours on Monday, November 14, in Bali. Investors applauded the two governments’ vow to communicate more frequently.

US crude prices jumped $1.05 to $86.92 per barrel, while Brent futures gained 72 cents to $93.86.

US gold futures settled little changed at $1,776.80 per ounce after bullion prices rose to near three-month highs on safe-haven buying in response to Polish media reports.

Bitcoin increased 1.33% to $16,809.00 but is still down approximately 20% for the month. In bankruptcy paperwork made public on Tuesday, the defunct FTX crypto exchange described a “serious liquidity situation.”

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