Wednesday Roundup: Wall Street surges following Fed’s Powell speech; What to watch for

by Market Updates and Alerts |

Jerome Powell eased concern about the pace of monetary tightening by the US central bank

U.S. stock markets closed higher on Wednesday after Federal Reserve Chairman Jerome Powell eased concern that the U.S. central bank embarked on a more aggressive pace of monetary tightening after handing over its biggest rate hike in two decades.

Speaking after the rate decision, which raised the bar to between 0.75% and 1%, Powell said 50 basis point hikes were on the table for future meetings — adding that 75 basis point hikes were not are something the authorities are currently considering.

On a different track, European stocks started the day operating in the red, while US index futures rose without major variations. The standby mode was activated today, a busy day with crucial events for the financial markets. The main one, the monetary policy decision of the Federal Reserve (Fed).

The 10-year US government bonds have changed the course of recent days and, moments ago, showed lower premiums, despite up 2.96%. In general terms, global bonds have reacted with an increase in premiums, which leads to a loss of nominal value, in the context of monetary tightening. The yield on German 10-year bonds, for example, rose to a rate close to 1%, while that of the United Kingdom hovered around 2%. The latter even saw their premium surpass the peak recorded at the height of the pandemic.

Higher interest

Investors expect the US central bank to increase the cost of money by 0.50 percentage point, which would represent the biggest interest rate boost since the year 2000. Typically, when central banks begin a cycle of monetary tightening, they tend to rise. the rates in a smaller proportion, 0.25 point, for example.

 The reason for such austerity, even in the face of the risks of driving the world’s largest economy into recession, is the high and persistent inflation, which has been breaking records and is at the highest level in 40 years.

European Central Bank (ECB) Executive Committee member Isabel Schnabel said it was time for policymakers to act to tame inflation, and an interest rate hike could come in July.

Meanwhile, Iceland’s central bank applied its biggest increase since the 2008 financial crisis and India raised its key interest rate in a surprise move on Wednesday.

On Thursday, the BoE is expected to raise interest rates to a 13-year high.

Oil soars

The European Union has proposed banning Russian oil for the next six months and refined fuels at the end of the year. Today, member states meet to discuss, and probably approve, the proposal. This would be the bloc’s sixth series of sanctions against Russia. The news acts as a source of pressure on oil, which is advancing strongly.

Balance sheets

In addition, business results will spice up today’s operations. To give you an idea, 43 balance sheets of companies that make up the S&P and about 20 members of the Stoxx 600 are scheduled.

Market thermostat

And as all this was not enough to make the market cautious, indicators that measure the pace of production (such as purchasing managers’ PMIs), consumption (retail sales, consumer credit) and inflation (CPIs) will be released today. in various corners of the world. Therefore, a session with some volatility is expected.

What to watch for

Thursday

  • USA: OPEC meeting; Challenger/Apr Announced Layoffs; Initial Claims for Unemployment Insurance; Unit Cost of Labor/1Q22; Productivity of the Non-Agricultural Sector/1Q22; Natural Gas Stock
  • Europe: Germany (Orders to Industry/Sea); Construction PMI – IHS Markit/Abr; United Kingdom (Composite PMI/Apr; BoE Inflation Report); France (Industrial Production/Sea)
  • Latin America: Brazil (Employment Evolution Index CAGED/Apr; Trade Balance/Apr; Argentina (Industrial Production/Sea)
  • Asia: Hong Kong (Retail/Sea Sales; Japan (IPC – Tokyo/Apr), Holiday in Japan
  • Central banks: Bank of England (BoE) interest rate decision and statement by Chairman Andrew Bailey. Speech by Philip Lane (ECB)
  • Balance sheets: Petrobras, Shell, ConocoPhillips, AB InBev, Shopify, EOG, ICE, Block, BMW, Credit Agricole, Vonovia, Apollo, DoorDash, ArcelorMittal, Zillow, Deutsche Lufthansa