Risk aversion sentiment grips the global markets

Vrasidas Neofytou
Head of Investment Research

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A general risk aversion sentiment dominates financial markets as investors weigh the prospects of rising interest rates and soaring inflation against the potential of slower economic growth.

The global equity markets have recently fallen to their lowest in nearly two years since the economic growth momentum after the pandemic is facing significant headwinds.

The risk-sensitive tech stocks are the worst performers among major sectors so far this year, with the tech-heavy Nasdaq Composite recording losses up to 30% from its yearly highs.

With Treasury yields sharply rising to their highest level since late 2018, the U.S. dollar is threatening to break higher across the board, adding pressure on the risky assets and currencies.

The monetary policy divergence between Federal Reserve with other major central banks have also pressured the yield-sensitive currencies, pushing Euro, Pound Sterling, and Japanese Yen to their lowest level in this decade.

Growing fears of construction and manufacturing recession and a slowdown in China dragged down commodity-linked currencies Australian and New Zealand dollars, while the lower oil prices hurt the Canadian dollar.

The risk-off mood has also hit hard cryptocurrencies, with the price of Bitcoin briefly falling below the $30,000 level for the first time since July 2021, and almost 60% down from its November peak.

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