The US Federal Reserve reduced the rate hike to a 0.25% step. ECB and Bank of England to raise rates by 0.5% today

By JustMarkets

The US stock markets rose yesterday amid a slowdown in the rate hike. At the close of the stock market on Wednesday, the Dow Jones Index (US30) gained 0.02%, and the S&P 500 Index (US500) added 1.05%. The NASDAQ Technology Index (US100) jumped by 2.00% yesterday.

The Federal Reserve raised its interest rate by 0.25% on Wednesday but indicated that it expects more hikes in the future. The Fed is planning two more 0.25% rate hikes in March and May, but analysts doubt the Fed needs to go that high, especially since inflation is slowing and there are early warning signs in the labor market. But investors were generally encouraged by Powell’s answers to questions during his press conference about easing financial conditions, such as the rebound in stocks and falling bond yields in recent months. That pushed stock indices higher.

Meta Platforms stock jumped by 17% thanks to fourth-quarter revenue outperformance. Revenue was $32.17 billion, better than the consensus forecast of $31.53 billion. Facebook reached the milestone of 2 billion daily active users. Major tech companies like Alphabet (GOOGL), Apple (AAPL), and Amazon.com (AMZN) report today. Volatility in the stock market will be high, especially during the reporting period.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained 0.35%, French CAC 40 (FR40) decreased by 0.08%, Spanish IBEX 35 (ES35) added 0.74%, British FTSE 100 (UK100) closed on Wednesday down by 0.14%.

The ECB and the Bank of England will hold their monetary policy meetings today. In both cases, an interest rate hike of 0.5% is expected. This may give confidence to the euro and the British pound amid a narrowing interest rate differential with the US Fed. With the British economy already projected to fall into recession in 2023, Governor Andrew Bailey and his colleagues should assess how much of a delayed negative impact a further series of rate hikes will have. Public employee strikes have heightened the sense of despair in the economy.

Gold reached the $1,950 mark as the dollar fell because the US Federal Reserve nears the end of its tightening cycle. Gold has an inverse correlation to the dollar index and government bond yields.

The US crude oil inventories hit a 20-month-high. With OPEC+ countries deciding to leave production levels unchanged in the expectation that Chinese demand will pick up, oil prices fell more than 3% yesterday. But the long-term outlook for oil remains bullish.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 0.07%, China’s FTSE China A50 (CHA50) jumped by 0.66%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.05%, India’s NIFTY 50 (IND50) decreased by 0.26%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.33%.

Bank of Japan spokesman Wakatabe said yesterday that the Bank of Japan’s resolve to continue monetary policy easing has not changed. But investors should understand that the Bank of Japan is likely to start the process of monetary policy normalization this year after the change of BoJ governor. Although some analysts believe that Japan’s central bank is unlikely to tighten monetary policy until deflation is defeated and the Ministry of Finance stops relying on ultra-low yields to control the cost of government debt. And that could take a much longer time.

S&P 500 (F) (US500) 4,119.21 +42.61 (+1.05%)

Dow Jones (US30) 34,092.96 +6.92 (+0.020%)

DAX (DE40) 15,180.74 +52.47 (+0.35%)

FTSE 100 (UK100) 7,771.70 −13.17 (−0.14%)

USD Index 102.06 −0.22 (−0.21%)

• – UK BoE Inflation Report at 14:00 (GMT+2);
• – UK BoE Interest Rate Decision at 14:00 (GMT+2);
• – UK BoE Monetary Policy Statement at 14:00 (GMT+2);
• – Eurozone ECB Monetary Policy Statement at 15:15 (GMT+2);
• – Eurozone ECB Interest Rate Decision at 15:15 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – Eurozone ECB Press Conference at 15:45 (GMT+2);
• – Eurozone ECB President Lagarde Speaks at 17:15 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2).

By JustMarkets

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.