Wall Street and European indices continue downward trend - impact on dollar and gold

Wall Street and European indices continue downward trend - impact on dollar and gold

According to a report by www.xtb.com,
Wall Street and European indices continue their downward trend, driven by a sharp rise in 10-year US Treasury yields, which today exceeded 4.1% (the highest level since the first half of December 2023). S&P 500 and Nasdaq 100 each lose over 1.00%. The dollar (USD) and the British pound (GBP) are the strongest currencies, while the Japanese yen is losing strength for the second day in a row. EURUSD is down 0.15% at 1.08600 and USDJPY is up 0.80% at 148.300.

UK consumer price inflation (CPI) for December was 4.0% year-on-year, higher than expected decline to 3.8% from 3.9% previously. Monthly inflation rose 0.4%, versus an expected increase of 0.2% and a previous decline of -0.4%.

US retail sales were very strong, supporting the dollar and lifting yields. The December retail sales report showed an increase of 0.6% month-on-month. Core sales were 0.4% month-on-month. In Europe, gloomy macroeconomic data from China cast a shadow of uncertainty. Retail sales growth of 7.4% year-on-year in December, compared to expectations of 8%, led to a slump in European fashion and luxury goods companies, which are heavily dependent on consumption conditions in China. Gold continues its two-day downtrend due to a sharp rise in yields and is currently losing almost 1.25%. The downtrend continues in the cryptocurrency market.

Given the sharp losses on Wall Street and European indices, the strengthening dollar and pound and the rise in consumer price inflation in the UK, as well as strong retail sales in the US, the financial market may experience turbulent times over the next few days and weeks. The increased returns could lead to a reallocation of investor portfolios, whereby investors could increasingly focus on higher-yielding forms of investment. In addition, luxury goods companies could come under pressure as a result of the uncertain economic situation in Europe as a result of gloomy macroeconomic data from China. The ongoing downward trend in gold and cryptocurrencies could also mean further losses in the market.