InvestMacro

By JustForex

The US indices continue to be under pressure due to the aggressive roadmap of the US Federal Reserve. At the close of trading on Tuesday, the Dow Jones index (US30) decreased by 0.35%, while the S&P 500 index (US500) lost 0.84%. The NASDAQ Technology Index (US100) fell by 1.37% yesterday.

Ahead of the Fed’s remaining meetings in 2022, analysts believe there will likely be another 75 basis point hike in November before the pace slows to 50 basis points in December as the Fed approaches the rate cap in early 2023. The Fed is likely to leave the discount rate at this capped level for a while before the economy eventually slows down. The gap between fighting inflation and adapting to growth is becoming increasingly difficult as the Fed hopes to cut the discount rate to neutral.

Equity markets in Europe mostly fell yesterday. Germany’s DAX (DE30) fell by 1.84%, France’s CAC 40 (FR40) decreased by 1.87%, Spain’s IBEX 35 (ES35) lost 1.24%, Britain’s FTSE 100 (UK100) closed down by 1.08%.

The Bank of England raised the interest rate to the highest level in 14 years. Money markets now expect another 50 basis point increase in November. The current issues affecting the Bank of England are a weak pound, fiscal policy, high energy prices, a technical recession with two consecutive quarters of GDP contraction, and a hawkish Federal Reserve stance. Experts believe that financial support from the UK government may stabilize inflationary pressures in the short term but will lead to higher inflation in the medium and long term.

The Swiss National Bankм(SNB) raised interest rates by 75 basis points to push the official borrowing rate into positive territory for the first time in more than a decade. The SNB said it could not rule out further rate hikes to ensure price stability over the medium term and was prepared to be active in the foreign exchange market as needed. The SNB now expects GDP growth to be 2% this year, down half a percent from the last meeting. The central bank also noted that inflation, which was 3.5% in August, is likely to remain elevated.

Norway’s Central Bank raised its interest rate by 50 basis points and signaled that another increase is likely in November. The bank’s interest rate has reached 2.25%. Meanwhile, the inflation forecast has been revised upward, peaking at 3% in 2023 and remaining at that level through 2024.

The US Federal Reserve’s 0.75% interest rate hike Wednesday was widely expected, but the central bank’s concurrent forecast was perhaps even more hawkish than expected. That pushed US Treasury bond yields to an 11-year peak, which is more bad news for unprofitable assets such as precious metals. The overall fundamental backdrop looks unfavorable for gold, given that it has recently been largely traded as a risk asset rather than a safe-haven asset.

Buyers in the oil market are hopeful that Vladimir Putin will reduce the supply of oil in Russia so much that prices per barrel will return to triple digits. But the Federal Reserve’s influence on the flow of funds through interest rates is proving tighter than anticipated. The European Union has stepped up its plans to impose a price ceiling on Russian oil, a measure aimed at weakening Moscow’s ability to finance the war in Ukraine. Also yesterday, Nigeria’s Oil Minister Timipre Marlin Silva, speaking on behalf of the OPEC+ producers’ alliance, threatened to cut global oil production if prices continue to fall.

Moscow’s decision to partially mobilize Russian military reservists marks the biggest escalation of the Ukrainian conflict since it began. Some Russians have rushed to the country’s borders to avoid mobilization. In southeastern Ukraine, attacks from Russia have intensified, coming on the eve of pseudo-referendums planned there by Moscow’s separatists.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.58%, Hong Kong’s Hang Seng (HK50) ended Thursday down by 1.61%, and Australia’s S&P/ASX 200 (AU200) closed the day by 1.56%.

Japan intervened in currency to support the yen for the first time since 1998, trying to stem a 20 percent drop in the yen against the dollar this year amid a widening policy divergence with the US. Japan’s Ministry of Finance said the Central Bank would defend the 145 USD/JPY level.

Singapore’s Core Consumer Price Index (CPI) rose year-over-year to 5.1% in August, exceeding expectations of 5% and up from 4.8% in July. Spending on food and transportation contributed the most to price pressures in August. The island nation imports nearly all of its fuel and grain. The Central Bank of Singapore (MAS) has tightened policy three times this year and is likely to continue to do so to offset increased inflationary pressures.

S&P 500 (F) (US500) 3,757.99  −31.94  (−0.84%)

Dow Jones (US30) 30,076.68 −107.10 (−0.35%)

DAX (DE40) 12,531.63 −235.52 (−1.84%)

FTSE 100 (UK100) 7,159.52 −78.12 (−1.08%)

USD Index 111.29 +0.65 (+0.58%)

• – Australia Manufacturing PMI (m/m) at 02:00 (GMT+3);
• – Japan BoJ Interest Rate Decision (Tentative);
• – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3);
• – Australia Services PMI (m/m) at  :00 (GMT+3);
• – Eurozone Spanish GDP (q/q) at 10:00 (GMT+3);
• – Eurozone France Manufacturing PMI (m/m) at 10:15 (GMT+3);
• – Eurozone France Services PMI (m/m) at 10:15 (GMT+3);
• – Eurozone German Manufacturing PMI (m/m) at 10:30 (GMT+3);
• – Eurozone German Services PMI (m/m) at 10:30 (GMT+3);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
• – UK Services PMI (m/m) at 11:30 (GMT+3);
• – Canada Retail Sales (m/m) at 15:30 (GMT+3);
• – US Manufacturing PMI (m/m) at 16:45 (GMT+3);
• – US Services PMI (m/m) at 16:45 (GMT+3);
• – Switzerland SNB Chairman Jordan Speaks at 18:30 (GMT+3);
• – US Fed Chair Powell Speaks at 21:00 (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.

By ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustForex

The Federal Reserve raised interest rates and changed its outlook for further rate hikes, indicating a period of higher interest rates. The prospect of higher interest rates over the long term has put pressure on growing sectors of the economy. As the stock market closed on Tuesday, the Dow Jones Index (US30) decreased by 1.70%, and the S&P 500 Index (US500) lost 1.71%. The NASDAQ Technology Index (US100) fell by 1.79% yesterday.

The Fed raised rates by 0.75% and signaled that rates will reach about 4.4% by the end of the year and 4.6% by the end of 2023, well above the 3.8% previously projected. For 2023, inflation is estimated to fall to 3.1% from the previous forecast of 2.7%, and in 2024, inflation expectations will remain unchanged at 2.3%. Fed members estimate that the economy will grow by 0.2% in 2022, sharply lower than the previous forecast of 1.7%. Growth forecasts have also been revised downward for 2023 and 2024. The Fed also predicts that a recession might be avoided, despite the need to accelerate rate hikes. But economists at Jefferies do not believe this and believe the Fed is incapable of effecting such a delicate planting of the economy. The pace of tightening has increased the risk that the Fed will slow growth too much, pushing the economy into a deep recession. The Fed’s aggressive push to bring inflation down to 2% would take years and cost higher unemployment and slower growth, according to policymakers who have questioned the prospects of a so-called “soft landing.” Bond markets quickly assessed the growing risk of recession as the Treasury yield curve flipped further. The yield on the 2-year Treasury bond rose above 50 basis points compared to the yield on the 10-year Treasury bond.

Federal Reserve Chairman Jerome Powell said Wednesday that the US real estate market will likely undergo a “correction.” This year, the Fed’s rate hikes have had the biggest impact on the real estate sector, slowing sales and lowering prices. Housing inflation will remain high for some time.

As for business activity, the geopolitical backdrop, slowing growth in China, the possibility of energy rationing in Europe, a strong dollar, and volatile domestic equity and real estate markets point to clear recession risks worldwide.

Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.76%, French CAC 40 (FR40) added 0.87%, Spanish IBEX 35 (ES35) declined by 0.01%, British FTSE 100 (UK100) closed the day at 0.63%.

Prime Minister Liz Truss’ plans to cut payroll taxes and reverse a planned corporate tax hike risk putting the UK national debt on an unsustainable upward trajectory, the IFS Institute for Financial Studies said Wednesday. Truss’ plans will likely result in a permanent budget deficit of about 3.5% of the Gross Domestic Product once energy subsidies end, well above the pre-recession average of 1.9%. Truss has promised tax cuts of about £30 billion a year. Finance Minister Kwasi Kwarteng will outline the details of the financial plan on Friday.

Finland will prepare a bill to restrict Russian tourists from entering its territory, Foreign Minister Pekka Haavisto said at a news conference in New York.

The European Commission is preparing a new package of sanctions against Russia. On September 23, the EU executive body will initiate a discussion of its proposals with ambassadors of EU countries. Among the proposed measures will be a restriction on Russian oil prices and a ban on imports of Russian diamonds and other luxury items.

The US President Joe Biden’s main talking points at the UN General Assembly:

• Russia is shamelessly violating the basic provisions of the UN charter. If countries can pursue imperial ambitions without consequence, it jeopardizes everything the UN stands for.
• Putin recklessly threatens nuclear weapons.
• No one has threatened Russia, and no one but Russia has sought conflict.
• The United States does not seek conflict with China.

Oil prices fell after the Fed raised interest rates to curb inflation because it could also reduce economic activity. A widespread increase in US oil, gasoline, and distillate inventories announced by the Energy Information Administration last week sent oil prices near their January lows.

Increased geopolitical risks made not only the dollar a safe haven but also the precious metals gold and silver, which yesterday showed resilience to the rising dollar. Investors are returning to safe haven assets because there are almost no alternatives now.

Asian markets were trading lower yesterday. Japan’s Nikkei 225 (JP225) was 1.36% lower, Hong Kong’s Hang Seng (HK50) decreased by 1.79% on Wednesday, and Australia’s S&P/ASX 200 (AU200) was 1.56% lower on the day.

Asian fund managers are betting that the inevitable fall of the Japanese yen will soon stop, and some are even getting ready for the possible fall of the Japanese government bonds. Analysts believe Japanese politicians will ask Bank of Japan Governor Haruhiko Kuroda to cancel the 0.25% ceiling on 10-year JGBs and try to steer the economy away from trouble. But for now, this is just a talk. At its meeting today, the Japan Central Bank kept all key elements of its policy unchanged.

S&P 500 (F) (US500) 3,789.93  −66.00  (−1.71%)

Dow Jones (US30) 30,183.78 −522.45 (−1.70%)

DAX (DE40) 12,767.15  +96.32 (+0.76%)

FTSE 100 (UK100) 7,237.64 +44.98 (+0.63%)

USD Index 111.32 +1.10 (+1.00%)

• – Japan BoJ Outlook Report (Tentative);
• – Japan BoJ Interest Rate Decision (Tentative);
• – Japan BoJ Press Conference at 09:30 (GMT+3);
• – Switzerland SNB Monetary Policy Statement at 10:30 (GMT+3);
• – Switzerland SNB Interest Rate Decision at 10:30 (GMT+3);
• – Norwegian Interest Rate Decision at 11:30 (GMT+3);
• – UK BoE Interest Rate Decision at 14:00 (GMT+3);
• – UK MPC Meeting Minutes at 14:00 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (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.