U.S. stocks were a little higher by the end of the hectic week. The U.S. Dollar index took a step back. Аll following the spirit of the Federal Reserve's (Fed) chair press conference on Wednesday's night of November 1. The central bank's decision to keep borrowing costs steady was not a surprise, as it was widely expected. However, investors thoroughly examined a statement by the Federal Open Market Committee (FOMC) to be more or less sure that a balanced approach to monetary policy is still here.
Many market optimists had hoped that the U.S. Federal Reserve's (Fed) message on September 20 would support their faith for further upside rally on Wall Street. Instead, Fed members completed the mission to cause a drop of the S&P 500 broad indicator to the deepest point of the month.
Big techs like Apple, Google and Microsoft lost between two and three percent of their value this Wednesday. The hyping AI-led NVIDIA stocks closed the day at their lowest since August correction. Even Tesla ultimately turned to the red, despite its shares prices initially gaining nearly 2.
Cooling of labour demand in America has become evident from the recent incoming data in the United States. Ironically, softer than expected data became a real pain-killer for the market sentiment, as it revitalised some faded crowd's expectations for the Federal Reserve (Fed) to make an extended rest stop in its rate-hiking cycle this autumn and winter.
of downgrading the U.S. sovereign credit rating by Fitch dumped all the recent
bullish enthusiasm in global markets. Treasury Secretary Janet Yellen made an
effort to defend by calling it an "entirely unwarranted" move. She
was referring to "ignored improvements in governance metrics" during
the current administration and the country's economic strength, as the agency's
"flawed assessment" did not take into account "a resilient U.S.
economy, with low unemployment, falling inflation, continued growth and strong
currencies are rallying, rubbing shoulders with other U.S. Dollar competitors,
as the whole set of inflation data from America stressed the Fed may be within
an ace of letting the borrowing costs to a halt. Consumer price pressure is at its
weakest since April 21, confirmed with producer price declining on factory
gates from 6.0% YoY in the beginning of the year to 2.3% YoY in May, 1.1% in
June, according to this week's samplings by the U.S. Bureau of Labour
The headline inflation
is at 3.0%, compared to 4.0% a month ago.
Dollar index (DXY) is moving mixed inside the narrow trading range of
102.4-103.2 points. Investors are waiting got the Federal Reserve (Fed) to
raise its interest rates to 5.5% in July from the current 5.25%. FOMC Minutes
that were released this week confirmed that. On the other side, inflation is
slowing down above expectations, which is positive for risky assets.
ADP Non-Farm Employment Change at 497,000 is clearly beating the forecasted
228,000 and is ahead of the previous 267,000. Continuing jobless claims were
also down to 1720,000 from 1733,000 a week ago.
Reserve (Fed) has persistently and patiently reiterated its intentions to raise
interest rates in 2023. The Fed’s Chair, Jerome Powell, once again repeated his
mantras of at least two interest rate hikes this year during the conference of
the financial stability hosted by Banco de Espana on June 29.
strong majority of Committee participants expect that it will be appropriate to
raise interest rates two or more times by the end of the year," said
Powell. This would bring interest rates to at least
5.75% from the current 5.25%.
National Bank (SNB) raised its key interest rate to 1.75% from 1.5% to secure
inflation slowdown that was recorded at 2.2% YoY in May. The move was expected
after the SNB raised its rate in March by 0.50 percentage points from 1.0%.
Inflation in Switzerland slowed down from its 3.4% peak in February to almost
comply with the target of 0-2%.
The SNB is unsettled
by raging inflation in developed countries as consumer prices rose by 4% YoY in
the United States, in the Eurozone by 6.1%, in Sweden by 9.7%, and in Canada – by
Reserve (Fed) has suddenly become even more hawkish as it promised to make two
more rate hikes this year after taking an expected pause in June. Its forecast seems
to be rather sensational as investors expected the Fed to terminate its hawkish
cycle and lower rates later this year.
Fed members said they want to raise the rates to 5.75% from the existing
5.00-5.25% range. The Fed sees a possible decline of rates to 4.75% only in
2024. This truly mind-boggling decision was followed by a weird macroeconomic
projection with improving GDP growth to 1.
The GDP of
the Eurozone has slipped down by 0.1% in the Q1 2023 following the same
contraction of Q4 2022. Two consecutive quarters of economic contraction
suggests a recession, although this assumption which was made in the early
1970s is widely disputed now. The Q4 2022 YoY figure was revised to 1.0% from
with still high inflation at 6.1%, and unemployment at 6.5%, the European
economy is suffering. Geopolitical risks in Serbia and the war in Ukraine are
contributing to the nose dive.