In June, the Federal Reserve’s FOMC raised interest rates by 75 basis points, the largest increase in nearly three decades since 1994, to levels last seen before the outbreak in March 2020.Markets fully priced in the hawkish stance ahead of the decision, with European and US stocks rising and bond yields collectively falling.
Stocks rose to session highs after A volatile Powell said a single 75 basis point rate hike was too big to become routine policy, as he was praised by some analysts for conveying a “strong commitment” to fighting inflation and denied that he would raise rates too aggressively in a row.
Italian bond yields and risk premiums fell sharply after the European Central Bank held an emergency meeting to discuss the soaring borrowing costs of peripheral eurozone countries and pledged to speed up work on new tools to stop the fragmentation of national borrowing costs.
Us economic data has been poor.The NAHB property developer sentiment index fell six months in a row in June to a two-year low since June 2020, and mortgage loan applications fell nearly 53 percent year on year last week.Retail sales unexpectedly fell 0.3 percent in May, turning negative for the first time in five months, indicating that the month’s highest inflation rate since 1981 was starting to bite into consumer spending.The New York Fed’s manufacturing index fell to minus 1.2 in June, its second straight month of contraction, and the price payment index was near a record high.
U.S. President Joe Biden called on U.S. oil companies to provide more refined products such as gasoline and diesel, calling record profits “unacceptable” and calling for an emergency meeting in coming days to ease the burden of high oil prices on consumers.
The 75 basis point rate hike, the biggest in 28 years, has been fully priced in, with money markets pricing in a 95 per cent chance, sending European and US stocks higher and bond yields lower.The S&P rebounded from its worst five-day slump since the start of the pandemic in 2020.
U.S. stocks opened higher Wednesday, June 15, with the NASDAQ up 1.2%, the S&P 500 up 1% and the Dow up nearly 300 points, following a sharp overnight advance in European stocks.In early trading, global airlines, financials, regional banks, the biotech index and the technology ETF were all up more than 1%.Hot concept stocks bright eye, Xiaopeng automobile rose more than 3%, bilibili rose more than 1%, Qutoutiao rose more than 18%, New Oriental rose four days in a row.
The S&P 500 and The Dow hit session highs shortly after the opening bell, with the Dow rising nearly 400 points, or 1.3 percent, and the S&P rising 1.6 percent and topping the 3800 round number.The Nasdaq rose for the second day in a row and hit a session high in midday trading, rising as high as over 220, or 2.1 percent, back above 11,000.The Nasdaq 100 also led the way with gains of up to 2%, while Russell small cap stocks rose as much as 1.7%.
After the hawkish Fed decision was announced, the US stock market fluctuated sharply within five minutes, first extending gains and then significantly narrowing.By the time Of Powell’s press conference, the S&P and The Dow had turned negative, with the Dow down more than 100 points and the NASDAQ losing two-thirds of its gains.During the press conference, although Powell expressed a firm fight against inflation, does not rule out another 75 basis points interest rate hike in July, but said that such a large interest rate hike is not a conventional policy, the US stock market eventually expanded and broke the day’s high, the Nasdaq as high as 3.8%.
On Wednesday, us stocks closed higher, the S&P and The Dow stopped falling for five days in a row, and the NASDAQ and THE NASDAQ 100 rose for two days in a row and were among the top gainers:
The S&P 500 rose 54.51 points, or 1.46 percent, to 3789.99, rebounding from a 17-month low and still in a bear market, down more than 21 percent from its early January peak.The Dow rose more than 300 points, or 1%, to 30,668.53.The Nasdaq closed up 270.81 points, or 2.50 percent, at 11099.15.The Nasdaq 100 ended up 2.49%, while Russell 2000 small-cap stocks halted a five-game losing streak to end up 1.36%.The Nasdaq Biotechnology index rose 2.4% and the KBW Bank Index rose 1.6%.
Energy was the only s&p 11 sector to fall as oil prices fell more than 2 per cent, with communications services and consumer discretionary leading the way with hot technology stocks, with consumer optional leading the way with more than 3 per cent.
Boeing led the Dow with a gain of more than 9 percent, while travel stocks such as cruise lines and airlines rebounded from lows.
Exxon, Chevron, refiners Marathon Petroleum, Valero Energy and Phillips 66 all fell under Pressure from the White House.
Star technology stocks rose and extended late gains.”Meta-universe” Meta rose more than 3% and Amazon rose more than 5%, both bouncing back from lows since April 2020.Apple rose 2% and Microsoft rose nearly 3%, both rising for the second day in a row and hitting one-year lows on Monday.Nai surged 7.5 percent, rebounding from a one-month low.Google parent Alphabet rose nearly 3 percent and Tesla rose 5.5 percent, both rising for a second straight day and off three-week lows.
Chip stocks also generally up.The PHLX semiconductor index.SIX closed up 1.8 percent, climbing back above 2,700 for a second straight day after hitting its lowest level since November 2020 on Monday.Intel rose 1.9%, AMD 2.7% and Nvidia 4.4%.Qualcomm rose as much as 1.7 percent after a European court overturned a $1 billion fine imposed by the European Union’s antitrust watchdog.
Among other big movers:
Bitcoin, the largest digital currency by market capitalization, hit an 18-month low, while coin-heavy MicroStrategy fell more than 2 percent in premarket trading, but stocks rose nearly 13 percent in early trading on Wall Street, while cryptocurrency exchange Coinbase rose more than 6 percent as losses in digital currencies narrowed.
Moderna rose nearly 6% after an FDA panel recommended its coronavirus vaccine for children under 5, with formal approval expected this week.Pfizer reversed its decline to gain more than 1% as the European Medicines Agency (EMA) launched a rolling review of its vaccine against a mutant strain of COVID-19 and plans to submit clinical trial data to the US FDA in the coming weeks.
Snowflake rose 7.6% after being upgraded to “buy” by Canaccord Genuity, citing growing demand and promising new products.
Stellantis, the world’s fourth-largest automaker, is cutting jobs at its Michigan plant, sending its shares up more than 4%.Robinhood, the millennial powerhouse, was downgraded to “underweight” and fell more than 2%.
Global stock markets have been volatile and hit hard at the start of the week as expectations mounted that the Federal Reserve and other central banks in developed countries would raise interest rates more aggressively to curb inflation, analysts said.Some believe the rising risk of recession and downward revisions to corporate earnings will drive the next phase of the current bear market in U.S. stocks, with the market not yet at the bottom and more pain ahead.
The pan-European Stoxx 600 index halted its six-session losing streak since Last Monday and ended up 1.42 percent on Wednesday, with only oil and gas stocks falling. The technology, autos, banks, financial services and materials sectors all rose more than 2 percent ahead of the Fed decision, while the euro zone Stoxx 50 closed up 1.64 percent.Major national stock indexes rose more than 1%, with Russia’s MOEX index also up 1.3%. Banks led the Italian stock index up nearly 3% after the European Central Bank said it would ease the crisis of high borrowing costs in peripheral countries. The FTSE Italian Bank Index rose more than 4%.
Yields fell by double digits across maturities, with short-end yields falling even further, halting a five-day losing streak after the ECB meeting
Before the release of the federal Reserve’s key monetary decision, as the market reached a consensus for a big 75 basis point interest rate hike, the European and Us bond yields fell collectively, and European bonds stopped falling for five consecutive days.
The five-year yield curve continues to invert with the 10-year and 30-year yields, suggesting recession risks remain.A decline in the 10-year break-even rate of inflation in the US shows confidence in the Fed’s ability to contain inflation.
The decline in BOND yields deepened significantly as Powell’s view that a series of very large rate increases was unlikely.The 10-year yield fell nearly 19 basis points on the day, losing 3.3 percent, down from its highest level since 2011 of 3.48 percent hit on Tuesday. It traded at 3.41 percent before the Fed decision, down nearly 7 basis points on the day.The 30-year bond yield fell as much as nearly 11 basis points to 3.32 percent. It was also trading at 3.41 percent before the Fed decision, inverting the 10-year curve.
The yield on the two-year note, which is more sensitive to monetary policy, fell more than 24 basis points to a session low of 3.20 percent, while it traded at 3.34 percent before the Fed decision, down more than 9 basis points on the day, down from its highest level since November 2007.The five-year yield fell more than 22 basis points to 3.38 percent from 3.51 percent before the Fed decision.
Other analysts said the sharp 75 basis point rate hike in June and the possibility of another 75 basis point increase in July raised questions about the Fed being too aggressive and putting the economy at greater risk of recession.
In an emergency ECB meeting aimed at easing fears of a new European debt crisis, Italian 10-year bond yields fell sharply from their highest since the 2011 European sovereign debt crisis, falling more than 35 basis points from session highs and lows to back below the 4 percent mark.
Yields on 10-year Greek bonds, which are also heavily indebted, also tumbled more than 50 basis points from their session highs.
The Italian Bund yield spread, a key measure of risk, narrowed by 30 basis points, the biggest one-day drop since March 2020.
Meanwhile, 10-year German and UK government bond yields both retreated more than 11 basis points, off the 2014 highs hit on Tuesday.
Oil prices collectively fell more than $3 to a two-week low on worries about the economy and demand, and the supply cuts scare sent European gas soaring 20 percent
Oil prices fell on Wednesday amid concerns about weak global growth and fuel demand amid sharp shifts by major central banks.
WTI Crude for July delivery ended down $3.62, or 3.04 percent, at $115.31 a barrel.Brent crude for August delivery closed down $2.66, or 2.20 percent, at $118.51 a barrel.NYMEX natural gas futures for July delivery rose more than 3 percent to $7.4200 per million British thermal units.
Oil prices extended losses by about $1 after the Fed decision.U.S. oil fell as much as $4.29, or 3.6 percent, on the day, losing $115 at one point in its second straight day of losses and nearly giving up all its gains since June 2.Brent fell as much as $3.41, or 2.8 percent, to $118 at one point, its lowest level since June 3.
The drop was also influenced by expectations of increased supply in the near term.U.S. EIA commercial crude oil inventories rose by nearly 2 million BPD last week, while U.S. oil production rose to 12 million BPD last week for the first time since April 2020 and the four-week average of refined oil demand was below seasonal norms.Biden’s “call” for oil companies and refiners to increase the supply of refined products, oil prices also deepened.
But the supply side continued to tight market expectations.Some analysts say that U.S. refineries are operating at more than 90 percent capacity and cannot ramp up production immediately.OPEC+ production is also well below official targets, leaving the oil market with a shortfall of about 1.5 million BPD in the second half.The International Energy Agency’s monthly report also said world oil supplies would struggle to keep up with demand by 2023, with a recovery in China driving demand growth and continuing concerns about tight supplies meant prices remained near $120 a barrel.
European gas jumped by double digits as Russia cut supplies again.ICE UK gas futures closed up more than 31 per cent, while European benchmark TTF Dutch gas futures rose nearly 20 per cent.German electricity prices for the coming month rose 23 percent at the end of the day.
During Powell’s press conference, the DOLLAR fell 105 points, the offshore YUAN rose to more than 800 points, and bitcoin pushed down to $20,000
The dollar index DXY, which measures the greenback against a basket of six major currencies, fell as much as 0.8 percent to a session low of 104.71 as the euro rose. Wall Street was back at 105.40 by midday, down less than 0.1 percent on the day.
After the Announcement of the Fed’s aggressive decision to raise interest rates, the DOLLAR index once returned to the intraday high set by European stocks, rising 0.3% and setting a new 20-year high. However, during Powell’s press conference, the DOLLAR index fell again, falling below 105 and setting a new low.
Sterling rose more than 130 points, or 1.1 percent, against the dollar, briefly breaking a 15-month low of 1.21 against the dollar as the bank of England was expected to raise interest rates for the fifth time in a row on Thursday after a 13-year high of 25 basis points to 1 percent in May.
The yen hit a 24-year low of 135.60 against the dollar during the Asian session, while Wall Street traded at 134, with the yen under pressure from a widening interest rate spread.The Australian dollar, a gauge of risk appetite, rallied 1 percent from a one-month low against the GREENback.The offshore yuan rose nearly 360 points to break 6.72. By the end of Powell’s press conference, the offshore yuan was up more than 800 points against the dollar, hitting a fresh session high of 6.6669.
As risk appetite ebbed, mainstream cryptocurrencies fell across the board in early trading, with a market cap of less than $1 trillion, down from $3 trillion at their peak in November.At one point, the leading bitcoin fell 10 percent and hit the psychological round $20,000 level, its lowest level in 18 months since December 2020. It is down nearly 70 percent from its Peak in November and has halved this year, down nearly 30 percent since Friday.Ethereum, the second largest, also fell more than 10% to below $1,000.
Bill Gates has called cryptocurrencies and NFT silly games.
But as U.S. stocks extended their gains late in the day, bitcoin pared losses of less than 3 percent after the Fed’s announcement to climb back above $21,000, ethereum fell less than 2 percent to climb back above $1,100, and most of the smaller cryptocurrencies rebounded.
After Powell’s press conference, gold regained more than 1%, and the improved demand outlook kept London metals broadly higher and halted a four-day losing streak
COMEX gold futures for August delivery closed up 0.3% at $1,819.60 an ounce ahead of the Fed’s announcement, as the dollar and Treasury yields fell hand-in-hand.
Spot gold traded at $1,820 ahead of the Fed decision, trimming gains on the day to 0.6 percent.The Fed’s hawkish decision to raise interest rates after the release of a fresh session high, once above $1,840, the day back up 1.6 percent.
Analysts say gold is in the middle of a fierce game between the potential negative impact of higher U.S. bond yields and the need to hedge against rising stagflation risks.
London base metals rose broadly, ending a four-day run of collective losses, as the outlook for demand improved and the DOLLAR fell.LME copper ended flat at $9,230 a tonne.Lunal rebounded from a seven-month low hit on Tuesday as inventories at LME-registered warehouses fell to their lowest level in 21 years.Lenni ended a six-day losing streak and closed up nearly $600, recovering from its lowest level in more than three months.Luncy bounced more than $1,300 back to $32,000.