When US stock exchanges closed and investors turned their noses home at 10:00 PM Norwegian time on Monday evening, there was a broad recovery in the rear-view mirror.
The Dow Jones Industrial Average rose 1.2 percent, while the Standard & Poor’s 500 Index rose less than 1.2 percent. Even the tech-heavy Nasdaq rose 0.9 percent, then defied the index’s impact from Tesla stock, as shareholders suffered amnesia on Monday.
An hour and a half before the opening of the stock market, the mood and expectations were positive in the US stock market, where the three central indexes were expected to rise by 0.5 to 0.8 percent. At the same time, many tech stocks were expected to get a good boost, with Tesla’s and Amazon’s stock prices expected to rise 3.5%. Netflix’s price hike was expected to be up to eight percent.
Selling for less than $200
But with the stock market opening approaching, there was news from the electric car maker about weak demand in China. This cuts the price of the Tesla Model 3 and Model Y by up to nine percent, according to Reuters news agency, among others.
With that said, the stock market will dump Tesla shares instead. In pre-trading, it was trading for $207 and $208, indicating a price drop of more than three percent compared to Friday’s closing price. In the opening trades, the share price fell to $204 as trading volume seemed to struggle to find a foothold.
During the first hour of Nasdaq’s opening hours, Tesla’s share price was as low as $198.59. It is the lowest level since May last year.
Over the course of the trading day, the stock recovered significantly, ending its 1.5 percent decline.
In general, the same factors are attracting stock markets in the same way they did months ago. The question of how high interest rates will rise before inflation falls, and how severely it will affect both stock markets and the economy in general, remains unanswered and injects tension into stock markets.
Japanese bear market
Boaz Weinstein, the founder behind New York-based Saba Capital — one of the best performing hedge funds of 2020, which also has a fund that is up 31 percent year-to-date — retired in financial times He warned that stock markets could face a “Japanese bear market”.
The somewhat eccentric term refers to the stock market crash in Japan in 1989, in which the Nikkei 225, one of the most centralized indicators of the Japanese stock market, fell so severely that, 33 years later, it is still about 30 percent below its peak in 1989.
Weinstein said: It has changed the psychology of whether or not being a contributor is a great thing.
Weinstein particularly highlights the quantitative tightening plans that central banks around the world have in place, or are planning to implement, involving large-scale sales of bonds bought by the same central banks during the financial crisis and the outbreak of the Corona pandemic.
The goal is ultimately the same with the people who have talked the most about raising interest rates: to bring down spiraling inflation.
– I’m very pessimistic. There is no rainbow waiting behind all this. He said quantitative tightening would be a real headwind for investors.
– There is no reason to believe that this economically difficult period will last only two to three quarters. He added that there is also no reason to believe that we will have a soft landing or a mild recession.
Weinstein himself is said to have prepared himself by buying “default swaps” – a default insurance policy – on periodic and volatile loans, as he believed the inevitable recession would lead to corporate defaults.
Asian stock exchanges challenged
Other than that, the Hang Seng Index on the Hong Kong Stock Exchange was at its lowest levels on Monday morning level since 2009 It ended with a fall of more than six percent. The reason is investors’ skepticism about China’s macroeconomic figures that remain Submit Monday morning.
That President Xi Jinping indicates an increased concentration of power, which has caused a sharp decline in US-listed securities, which reflect core Chinese mutual funds and corporate stocks. E-commerce store Alibaba fell 12.6 percent, while electric car manufacturer Nio dropped 15.9 percent.
However, European stock exchanges, such as Frankfurt, London and Paris, were not affected much by the turmoil in China’s stock market, and rose throughout Monday.
The London stock market seemed to like that the Conservative Party had reached a deal. The benchmark FTSE 100 index stood at around 0.6 per cent with news that Rishi Sunak will now become the new prime minister.
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