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- Federal stance at the meeting caused U.S. stocks fall, Treasury bonds interest rate curve flattening
- European stock market rebounded slightly after a sharp drop in recent days
- Federal policy decision on Wednesday, Asian stocks fell
Federal stance at the meeting caused stance at the meeting, causing US stocks to fall, and bond interest rate curve flattening
U.S. stocks fell on Wednesday, the Federal Reserve raised the federal funds rate by 75 basis points, implying that the path of policy tightening will be more firm, and this year, will raise interest rates by 2125 basis points. The newly released economic forecast also shows slowing growth, rising unemployment rates and rising inflation in core personal consumption expenditures. Chairman Powell also pointed out that there is no painless way to reduce inflation when the opportunity to achieve a soft landing is reduced. S&P 500 fell 1.7%.
U.S. Treasury bonds interest rate curve flattened significantly, and investors expect the Fed to adopt a more aggressive tightening policy and the risk of a significant economic slowdown increased. The interest rate for the two-year Treasury bill rose by 8 basis points to 4.05%, the 10-year interest rate fell by 3 basis points to 3.53%, and the 30-year interest rate fell by 7 basis points to 3.50%.
European stock market has fallen by about 7% in the past 6 trading days, and rebounded slightly on Wednesday. The stock market was under pressure, as sharp tightening of policies, rising government bond interest rates and hit by stock valuation , all deepened market concerns. The Russian-Ukrainian conflict escalated again, and the stock market still recorded an increase on the eve of the Federal Reserve's meeting. Overall, the Dow Jones Europe 50 index rose 0.7%.
European government bonds rose (rate rate fell), the Federal Reserve's policy decisions have caused economic concerns, and geopolitical development has attracted much attention. Overall, the interest rate of Germany's 10-year government bonds fell by 4 basis points to 1.89%, while the trend of the interest rate of France's government bonds in the same year was similar. The interest rate of non-core bonds also fell, with the UK's 10-year government bonds rising slightly by 2 basis points.
expectation on the eve of the Federal Reserve hike , Asian stock market fell on Wednesday, and the currency in the region depreciated against the US dollar. The rise in bond interest rates led to the decline of technology stocks and other growth stocks. Investors are also concerned about geopolitical development. Japan's Nikkei 225 index fell 1.4%, while Hong Kong's Hang Seng index fell 1.8% during the day. India's Sensex index fell 0.4%.
Oil prices fell on Wednesday, with the Federal Reserve's hawkish policy decisions/guidances, which intensified concerns about the economic slowdown, and government data showed that US crude oil inventories increased weekly and US fuel demand weakened. Demand concerns overshadow geopolitical risks in supply. U.S. oil prices fell 1.2% to $82.9 in November.
main data release and market events
Yesterday
US Federal Reserve Bureau (Federal) Federal Open Market Committee (FOMC) held a September meeting, and the target range of federal funds rate was raised by 75 basis points to 3.00-3.25%, which is the third consecutive "large-scale" interest rate hike. In terms of FOMC forecasts, the new announcement in September has seen some major changes compared with June. Growth was significantly lowered from 2022 to 2023, and the economy is expected to operate at a lower-trend pace until 2025. The unemployment rate is currently expected to rise above the long-term sustainable level in 2023 and remain above that level at least as far as 2025. Although expected growth has declined and unemployment is expected to rise, the Fed has raised its core personal consumption expenditure inflation forecast for 2022 and 2023. The federal fund path for committee members is expected to push up significantly by median , especially at the end of 2022 and end of 2023. Therefore, the fund rate is expected to peak at about 4.50%, and remain at that level by 2023, before gradually dropping to about 3.00% by the end of 2025.Overall, these forecasts show that for some time, the Fed will maintain policy interest rates within a restrictive range - Chairman Powell stressed at a press conference that this is a necessary action to alleviate the economic slowdown and keep inflation under control.
U.S. 8 in On-home sales fell 0.4% (month-on-month), with an expected decline of 2.3%. Reselling of homes slowed in the seventh month as policy officials sharply tightened monetary policy to curb excessive demand. If central bank officials maintain a hawkish attitude, the numbers will continue to slow down, while the newly released data does continue to reflect tight inventory in houses. This is expected to help prevent prices from slumping at a similar rate in 2007/08.
As expected, Brazil Central Bank Monetary Policy Committee maintains its Selic interest rate at 13.75%. This decision was made after a tightening cycle of 11.75 percentage points, which gave Selic interest rates greater buffer space than policy interest rates in major developed countries. Officials said the authorities will now suspend actions to further assess the role of the earlier rate hikes and the ongoing uncertainty affecting the global macro environment. If inflation does not slow down as predicted, they will tighten their policies again without hesitation.
Economic data released today (September 22, 2022)
Bank of England Monetary Policy Committee will hold a meeting on Thursday. Due to the death of Queen Elizabeth II of England, the meeting was postponed by one week than expected. At the meeting, the Monetary Policy Committee is expected to raise interest rates by 50 basis points to 2.25%. Recent inflation data, sharp rise in energy prices and the announcement of a large-scale fiscal plan by the new prime minister have all pushed the market to expect interest rates to be around 4.50% in mid-2023. Investors will closely monitor signs of the Monetary Policy Committee denying or confirming market expectations, with the central bank in a dilemma as the economy is rapidly weakening and inflation is at a decades high.
expects will maintain all monetary policies unchanged at the September monetary policy meeting. The Bank of Japan may confirm that the extended pandemic support program will end at the end of September.
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Expiry date: September 28, 2022
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