The winter is undoubtedly coming in the frontyard of The world financial market. We will explain the current situation of global financial market in this article.
The current situations
First, the UK financial markets were few yards away from the brink of collapse, before the Bank of England (BoE) announced an “unlimited” purchase of government bonds.
Then, in the early days of October, rumors have been spread about the bankrupcy of Credit Suisse Investment Bank – one of the biggest banks in the system. The story started with the fact that the CDS score – a measure of the bank’s bankruptcy risk – has risen sharply, surpassing the 250 point level, fearing everyone about the chance of Credit Suisse bankruptcy.
Luckily, by the end of the week, the market had calmed down when Credit Suisse announced a plan to buy back debt to strengthen capital adequacy. However, the CDS score was still above 300 and the short selling stream of Credit Suisse shares has remained at a high stage since 2020. Credit Suisse’s story will continue to be complicated until the end of October, when the plan to restructure the bank in the direction of cutting some loss-making segments is announced.
And yet, during the week, OPEC+ also decided to cut oil production by 2 million barrels per day. The White House immediately accused OPEC+ of siding with Russia. Before the meeting, the US has made several efforts to change the decision of OPEC +. This is also a significant obstacle for the Biden government, which is trying to find a way to lower gas prices before the midterm elections in November.
Finally, at the end of the week, the critical stab to “the hearts” of US tech stock holders was a stronger-than-expected job gain statistic. In detail, there are almost 263,000 new jobs in comparison with predictions of less than 200,000 jobs and the unemployment rate fell to 3.5% in the US.
Where does the money go?
At the end of the week, US and European stock markets closed in the red again, with the Dow Jones Industrial Average losing more than 600 points and the Nasdaq down 3.8%. The possibility of the US bottom in June being broken is quite high and people are still wondering where the new bottom is?
So where did the money go when hundreds of billions of dollars have been poured from China and Europe to the US? The answer belongs to American investors who are holding a lot of cash in market accounts to gain the interest rate of 2%. When comparing to investing in stocks market with a higher chance of losing, people are not rushing to buy stocks, especially when they see the prospect of declining profits of listed companies and some also expressed that they would rather put their money in a casino like CASINOMENTOR than invest in stock market.
Europe is entering an uncertain winter with risks in gas and crude oil supplies. On the side of global financial market, a “liquid winter” is also coming with risks of unexpected “accidents”, or even the “black swan” events.