The last Friday's session of Nasdaq closed lower due to the pressure from Apple's stock. On the other hand, USD is gaining ground as investors are trying to move away from risky assets. Some of the reasons behind this risk aversion behavior are the new COVID cases in China and depressed consumer spending in the USA.
If we look at China, the government is continuing with its tough COVID-19 restrictions. As a result, business groups and the residents of China are frustrated, but it seems that the government is not wavering from its stance.
As for the Nasdaq, the performance of Apple stock can have a big impact on the index. And that's what caused the recent drop in the Nasdaq index as well.
One of the major plants in China is Foxconn, where the iPhones are manufactured. Recent reports suggest that iPhone shipments will slow down as thousands of workers have left Foxconn.
China Continues With Tough COVID Restrictions
It seems that the biggest risk is the situation in China which is continuing its zero-COVID policy. And investors around the world are now waiting for a major catalyst before they can move toward riskier assets once again.
In that regard, it seems that the biggest catalyst will most definitely be the easing of restrictions in China. On the other hand, the continuation of restrictions will lead us to more risk-off behavior from investors. In addition, the lower volume is also a factor that leads us to the drop in the NASDAQ on Friday!
Looking ahead, the gift-buying season in the USA is about to start. However, let's not forget that inflation is also rising in the USA, which could weaken consumer spending.
So far, even the special discount days have failed to bring major crowds to the store. So it seems that the rising inflation will most definitely affect consumer spending.