News & Analysis

Stocks dump, yields rise as market reprices rate-hike roadmap ahead of Jackson Hole

23 August 2022 By Lachlan Meakin


US equites suffered a steep decline in Mondays session  in a broad sell-off that saw the Nasdaq leading the charge lower dropping 2.6% as global risk appetite was pressured by growth and energy supply concerns.

The S&P 500 is now down over 200 points since the price was rejected at the 200 day SMA last week.

Yields rose sharply as traders positioned for a more aggressive rate-hike trajectory from the Fed coming up to the closely watched Jackson Hole symposium later in the week. A 75bp hike in September is now the preferred market bet, with odds rising to 55%, up from 47% at Fridays close.

The US dollar was again ascendant on the back of this hawkish repricing in yields seeing the US Dollar index retest the 109 level and seeing EURUSD testing support briefly at parity before crashing through to end the session down almost 100 pips, and well below the psychological 1.00 level.

After a period of low volatility the VIX index spiked above 24, equalling the highs set earlier in the month as traded rushed to hedge themselves from a further downturn.

Crude Oil dumped then pumped as optimism of an Iran deal saw prices drop, only to sharply rebound on OPEC+ hints that they may need to tighten output to “stabilise” the oil markets.

In Economic announcements today, multiple PMI figures are due out of Germany, the UK and US. German and UK figures in particular will be closely watched as they are expected to show the energy crunch caused weakness in their respective manufacturing sectors, putting both the BoE and ECB in very difficult positions as stagflationary forces start to take hold (slow growth, high inflation). GBP and EUR traders will need to keep an eye on these.

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