Oil and Crypto Sharply Lower as USD Climbs to New Records

U.S. stocks weren't expressing apparent dynamics on Monday initially but took a turn lower in the afternoon following stark comments from JPMorgan Chase CEO Jamie Dimon, who warned that the U.S. is likely to enter a recession within the next 6 to 9 months.

Dimon made the comments in an exclusive interview with a CNBC broadcast. "You can't talk about the economy without talking about stuff in the future...and this is serious stuff," Dimon said in the CNBC interview. He added that he thinks Europe is in a recession already and that the US “is probably next”.

Although the U.S. jobs market for now in September remained surprisingly strong, the Fed is working hard to change that by aggressively raising interest rates to ease demand for everything from cars and homes to appliances. The pace of job growth is expected to be roughly cut in half during the fourth quarter of this year, Bank of America (BAC) wrote to clients in its recent report. As pressure from the Fed's war on inflation builds, nonfarm payrolls will begin shrinking early next year, translating to a loss of about 175,000 jobs a month during Q1, the bank’s analysts suggested. Charts published by Bank of America particularly forecast nationwide job losses will continue through much of 2023.

Meanwhile, Federal Reserve Vice Chairman Lael Brainard articulated his view that the central bank should exercise caution in its rate-hiking spree. In comments yesterday, Brainard advised the Fed should move forward "deliberately" and in a "data-dependent manner" to gauge how previous rate hikes are working through the economy.

Today, the mood in markets is still extremely fragile ahead of Thursday’s US inflation data, with the case for another 75 basis-point rate hike from the Fed likely to be strong if the reading comes in higher than forecast. Meanwhile, U.S. stocks open lower today, extending a fifth day of the losing streak as the Nasdaq and S&P 500 are trading near their lowest intraday levels in more than 2 years. The S&P 500 fell 1.02%. The Nasdaq Composite retreated 0.90% concurrently. The Dow Jones Industrial Average fell 0.10%. Investors’ risk appetite remains subdued as they await inflation data, minutes from the Federal Reserve’s September meeting, and the start of Q3 earnings season, set to begin later in the week.

The state of the global economy becomes even a greater concern after both the World Bank and the IMF predicted a global recession in 2022 and 2023. The International Monetary Fund cut its global growth forecast for 2023 to just 2.7%.

In Europe, the Stoxx 600 is declining about 0.81% as miner stocks led sectors lower along with chemicals and energy companies. The DXY dollar index is trading slightly firmer again. As of 4:05 p.m. CET, the British FTSE 100 declined 0.93%. The best performer is so far Haleon (HLN.L), with its shares recovering 1.48% after yesterday’s slide. The French CAC 40 lost 0.64% with Pernod Ricard (RI.PA), down 0.06%. Meanwhile, the German DAX dropped 0.89%.

The Bank of England, BoE, widened its emergency bond buying operation to include purchases of inflation-linked gilts, calling it “fire sale dynamics”, despite the jobless rate in the UK declined to 3.5% in the 3 months to August, against 3.6% in the previous quarter, while average weekly earnings including bonuses rose by 6.0% YoY to £617 in the same period. Industrial production in Italy surged by 2.3% MoM in August. That comes after a severe selloff that saw yields on so-called “linkers” surging by the most on record.

Commoditywise, crude oil prices gained 15% last week following a decision by OPEC+ to cut production by 2 million barrels per day. Light sweet crude is now just above $89 per barrel.

Most cryptocurrencies are still trading lower. The price of Bitcoin (BTCUSD) remains below $20,000 at $18,928. The price of Ethereum (ETHUSD) is down about 0.5% at $1,276.

Asia’s top chip stocks tumbled in an escalating US-China tech race that has erased more than $240 billion from the sector’s global market value. Taiwan Semiconductor Manufacturing (TSMC), the world’s largest contract chipmaker, plunged a record 8.3% while Samsung Electronics also tangibly declined. That comes as the U.S. Administration imposed sweeping curbs on companies that conduct technology business with China. Investors tallying up the damage see a further blow to TSMC, as well as a raft of Chinese moguls, that underpin the $550 billion global chip industry. All in all, earlier this morning, in China, the Shanghai Composite lost 1.7%. The Hang Seng Index fell nearly 3%, led by a selloff in technology stocks.