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Yesterday, US index futures continued their decline during the regular session. Today, they hover around weekly lows, showing hardly any movement. The S&P 500 futures edged up by 0.1%, while the tech-heavy NASDAQ gained 0.2%. As we can see, investors, adjusting to the idea of prolonged higher interest rates, are hesitant to re-enter the market. Treasury yields dipped after the 10-year bond rate hit 4.5%, the highest since 2007.
Today, the Bank of Japan concluded its latest monetary policy meeting, the final one in a week filled with rate decisions by global regulators. The yen weakened as the Bank of Japan maintained its interest rates and its yield target for 10-year bonds. The bank also reaffirmed its expectations of slowing inflation.
This week, many major central banks emphasized their vigilance towards inflation, cautioning investors about the risks of cutting rates prematurely. The increasing possibility that monetary policy might lead to a recession has investors fleeing stocks at the fastest pace since last December. According to EPFR Global data, stock funds witnessed an outflow of $16.9 billion over the week.
Persistently high rates continue to dampen spending and affect market sentiment. Markets are now less focused on whether the Federal Reserve will hike rates again, and more on the potential of a recession next year and how prepared the stock market is for it.
Today, fresh signs of eurozone economic fragility emerged as data revealed that private sector activity in both France and Germany decreased in September. Against this backdrop, the euro has been declining against the US dollar for ten consecutive weeks.
Oil prices rose, in part due to news of Russia's plans to ban the export of diesel fuel and gasoline. European natural gas prices dropped after Chevron and Australian unions agreed to end strikes at major plants.
As for the S&P 500, demand for the index remains weak. Bulls need to take control of $4,357 to reverse the bear market. From this level, they can push the price to $4,382. Bulls also should take control of $4,405, which will restore the market balance. If the index declines amid decreasing risk appetite, bulls will have to protect $4,332. Breaking through this level, the trading instrument may return to $4,304 and $4,255.
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