The AEX index is turning dark red again today. The stock exchange in Amsterdam is down 1.32 percent and is trading at 922.6 points. The chip sector in particular is hit hard: ASML loses 6.42 percent, while BESI is even 6.96 percent lower.
US interest rate expectations push markets lower
The sharp decline is a result of the recent interest rate policy of the American central bank (Fed). At the end of October, the Fed already indicated that an interest rate cut in December is unlikely. That warning was confirmed this week in the minutes of the last interest rate meeting.
More and more members of the interest rate committee see an interest rate pause as the right next step. This means that the prospect of easing monetary policy disappears, which mainly affects risky investments such as shares and crypto.
The slide of the American S&P 500 started exactly when so-called real interest rates started to rise. That real interest rate is the actual price of capital, calculated by subtracting inflation from the nominal interest rate. The higher this interest rate, the more attractive government bonds become compared to shares.
Strong dollar and defensive market posture
It is not without reason that we see the US dollar strengthening significantly this week. The financial markets are preparing for a more defensive phase. Remarkably, the Fed was still counting on several interest rate cuts a few months ago. Now that inflation expectations are falling, there would be room for this. Yet the opposite happens.
The result: a short-term liquidity shock. Investors are withdrawing from risky positions, without any immediate signals of a recession or credit crisis.
What can we expect?
The coming weeks will be crucial for both the crypto market and the stock market. If the US central bank does decide to cut interest rates in December, this could lead to a strong recovery. But for now, the market is holding its breath.
Source: https://newsbit.nl/aex-koers-kleurt-donkerrood-asml-en-besi-kelderen-met-7-procent/
