The market perceives further Fed plans as positive

The US stock indices finished Thursday's trading with growth. The Dow Jones Index (US30) gained 1.23%, the S&P 500 Index (US500) added 1.23%, and the NASDAQ Technology Index (US100) jumped by 1.33% at the close of the stock market. Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors, said the market is still trying to figure out what the latest news from the Fed means for the future. They tell us that the markets still believe in the Fed's ability to land softly on the economy. Stock indices initially priced in a more aggressive interest rate hike, so now that news of the Fed's plans have come out, the markets have taken it positively.

As labor demand remains strong, the number of US new jobless claims fell last week. Initial applications fell by 15,000 to 214,000. In February, the US industrial production increased by 0.5% from the previous month.

Despite sanctions, JPMorgan processed a Russian government payment order for coupon payments on two Eurobond issues totaling $117.2 million. JPMorgan is the correspondent bank through which Citigroup's Russian payments go. JPMorgan and Citigroup representatives declined to comment.

International rating agency S&P Global Ratings has decided to downgrade Russia's long-term sovereign credit rating from CCC- to CC, keeping the negative outlook.

Delta Air Lines Inc. and Airbus Group SE signed a memorandum of cooperation in the field of research and development of hydrogen aircraft.

Today is "Witching Friday" in the US, called "Quadruple Witching Day." Most contracts (index futures, index options, and options) expire on that day. As a result, trading volume and market volatility sharply increased in the last hours.

Major European indices were mostly on the rise yesterday. German DAX (DE30) decreased by 0.36%, French CAC 40 (FR40) jumped by 0.36%, Spanish IBEX 35 (ES35) gained 0.38%, British FTSE 100 (UK100) added 1.28%. As expected, the Bank of England raised the interest rates by another 0.25% but remained less aggressive in further increases. The current interest rate level of 0.75% is pre-crisis value, but the inflation rate is much higher than before the pandemic. The protocol showed that if energy prices continue to rise, UK inflation could exceed 8% in the second quarter of 2022.

In February, Europe's inflation rate reached 5.9% (previous 5.8%) in annual terms. Economists have warned that Russia's invasion of Ukraine will cause further increases in energy prices, leading to more inflation in the coming months. But ECB officials believe the situation is under control, so they do not plan to tighten monetary policy.

Oil prices increased more than 7% due to renewed focus on supply shortages in the coming weeks due to sanctions against Russia. Western governments are still unable to negotiate with OPEC+ to get more oil from the Persian Gulf to replace the barrels likely to be lost from Russia. Among OPEC+ countries, only Saudi Arabia and the UAE can quickly increase production to offset supply cuts from Russia.

Gold added 1% as the US dollar, and Treasury yields declined. Longer-term, higher interest rates will weigh on the precious metals.

Asian stock indices increased yesterday. Japan's Nikkei 225 (JP225) gained 3.46%, Hong Kong's Hang Seng (HK50) added 7.04% on the day, and Australia's S&P/ASX 200 (AU200) increased by 1.05%.

On Friday, the Bank of Japan maintained its massive stimulus measures and warned of increased risks to the economic recovery due to the war in Eastern Europe. The Bank of Japan kept its short-term rate target at -0.1% and the 10-year bond yield at 0%. With Japan's inflation and wage growth lagging behind other countries, the Bank of Japan has no choice but to maintain its stimulus measures patiently. This ultra-soft policy has allowed Japan's inflation rate to rise slightly to 0.6% (previous 0.2%) on an annualized basis, but it is still well below the 2% target.

US President Joe Biden and Chinese President Xi Jinping will hold telephone talks today. The two heads of state are expected to discuss bilateral relations and the situation around Ukraine.

Main market quotes:

S&P 500 (F) (US500) 4,411.67 +53.81 (+1.23%)

Dow Jones (US30) 34,480.76 +417.66 (+1.23%)

DAX (DE40) 14,388.06 -52.68 (-0.36%)

FTSE 100 (UK100) 7,385.34 +93.66 (+1.28%)

USD Index 97.99 -0.63 (-0.63%)

• – Japan National Core Consumer Price Index at 01:30 (GMT+2);
• – Japan BoJ Interest Rate Decision at 04:30 (GMT+2);
• – Japan BoJ Monetary Policy Statement at 05:00 (GMT+2);
• – Japan BoJ Press Conference at 08:30 (GMT+2);
• – Canada Retail Sales (m/m) at 14:30 (GMT+2);
• – US Existing Home Sales (m/m) at 16:00 (GMT+2);
• – US FOMC Member Bowman Speaks at 20:00 (GMT+2).

by JustMarkets, 2022.03.18

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.