07 Jun

The Central Bank of Australia surprised traders. Boris Johnson was able to get a vote of confidence

June 7, 2022

by JustForex

At the close of the US stock market on Monday the Dow Jones index (US30) increased by 0.05%, and the S&P 500 index (US500) added 0.31%. The Technology Index NASDAQ (US100) increased by 0.40% yesterday. At the end of the day, all three indices closed in small plus.

On Monday, the Federal Reserve announced that it would release the results of its annual stress test of the nation’s largest banks on June 23. Investors closely watch the test results, which examine how large bank portfolios would behave in a hypothetical recession. It shows how much capital banks would need to hold as a safety cushion in case of losses.

Equity markets in Europe also rose on Monday. The German DAX (DE30) gained 1.34%, the French CAC 40 (FR40) jumped by 0.98%, the Spanish IBEX 35 (ES35) added 1.28%, and the British FTSE 100 (UK100) closed adding 1.00%.

Boris Johnson won a vote of confidence in the British Parliament and retained his position as party leader and British Prime Minister for the next 12 months. There were 211 votes in favor and 148 against. The small gap demonstrates that many in the Conservative ranks are pushing for the Prime Minister’s departure, dealing a blow to his credibility. The British pound did not react much to this event. Given the increasing pressure on the British prime minister and his team, Boris Johnson needs to be more selective in his actions now.

Oil prices increased on the expected demand recovery in China as the country loosened tight restrictions on COVID-19. Analysts doubt that higher production targets from OPEC+ producers will weaken constrained supply, so they forecast a further gradual rise in energy prices.

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The yield on 10-year US Treasuries increased yesterday and reached 3.06% in the early Asian session today. This led to a rise in the dollar index and a decline in gold prices as gold and silver prices are inversely correlated to US government bond yields.

Asian markets are trading flat from the open today. Japan’s Nikkei 225 (JP225) added 0.48%, Hong Kong’s Hang Seng (HK50) decreased by 0.12%, and Australia’s S&P/ASX 200 (AU200) lost 1.55% from the opening bell.

The Reserve Bank of Australia surprised traders and investors today. The RBA aggressively raised the benchmark interest rate by 50 basis points to 0.85% from 0.35%, which came as a surprise. The RBA also indicated that more tightening would be needed to suppress rising inflation. The Australian dollar jumped sharply on this news, while the ASX 200 index declined. The further size and timing of interest rate hikes will be determined by incoming data and the board’s assessment of inflation and labor market prospects.

China’s megacities of Beijing and Shanghai have been returning to normal in recent days after two months of painful lockdowns aimed at curbing Omicron variant outbreaks. On Monday, traffic bans were lifted, and restaurants opened in most parts of Beijing.

The Bank of Japan continues to maintain a “soft” monetary policy. Bank of Japan Governor Haruhiko Kuroda said Monday that the central bank’s top priority is to support the economy, stressing an unwavering commitment to maintaining a “strong” monetary stimulus.

Main market quotes:

S&P 500 (F) (US500) 4,121.43 +12.89 (+0.31%)

Dow Jones (US30) 32,915.78 +16.08 (+0.049%)

DAX (DE40) 14,653.81 +193.72 (+1.34%)

FTSE 100 (UK100) 7,608.22 +75.27 (+1.00%)

USD Index 102.39 +0.25 (+0.24%)

Important events for today:
  • – Australia RBA Interest Rate Decision at 07:30 (GMT+3);
  • – Australia RBA Rate Statement at 07:30 (GMT+3);
  • – UK Services PMI at 11:30 (GMT+3);
  • – Canada Ivey PMI at 17:00 (GMT+3).

by JustForex

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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