hopes for the end of the war
Fed turnaround causes brief hiccups on Wall Street
03/16/2022, 9:30 p.m
The US Federal Reserve has initiated the long-awaited turnaround in interest rates. The moderate first step will probably be followed by a few more this year. However, the central bank paints the picture of a solid economy. Positively received signals from Kyiv and Moscow then created additional buying mood among traders.
On the day of the interest rate turnaround, Wall Street continued the gains of the previous day. The US Federal Reserve had tightened its monetary policy and announced a series of further interest rate hikes this year in order to curb high inflation in the country. The policy rate rose by 25 basis points, as was widely expected. It was the first interest rate hike since December 2018. The projection that most US central bankers expect six more interest rate hikes in the current year came as a bit of a surprise.
After a brief moment of shock and a trip into the red, Wall Street quickly recovered following the interest rate decision. Because US Federal Reserve Governor Jerome Powell outlined a rosy picture of the US economy. “With unemployment on target and GDP performing well, inflation concerns are the focus of attention,” said market strategist Jason Brady of Thornburg Investment. Inflation is the greater threat to the US economy than moderately rising interest rates, it said.
Hopes in the Ukraine War
For the Dow Jones Index it went up by 1.5 percent to 34,063 points. The broader one S&P 500 was up 2.2% and the more tech-heavy Nasdaq Composite was up 3.8%. The Nasdaq was supported by China’s technology sector rally. The stock market was fueled by hopes of an end to the Ukraine war. Both Russian Foreign Minister Sergey Lavrov and Ukrainian President Volodymyr Zelenskyy confirmed a rapprochement of positions.
However, traders warned against too much optimism, as the Russian forces continued their attacks with undiminished severity. US President Joe Biden promised $1 billion in military aid to the US Congress after Zelenskyi broadcast a video.
Statements by the Chinese government also provided a positive impetus. This had committed itself to stable financial markets, which had caused strong price gains on the Asian stock exchanges. China also announced measures to support the domestic economy.
The dollar has been under pressure with the recent negotiations between Ukraine and Russia. the dollar index fell 0. percent after having recovered significantly in the meantime with the interest rate hike. This means that the dollar is less in demand as a safe haven currency in times of crisis, said Swissquote analyst Ipek Ozkardeskaya.
Foxconn works again – Apple rise
Developments around Ukraine weighed on oil prices. In addition, US crude oil inventories had risen on a weekly basis, which also weighed on prices. Because analysts had predicted a decline.
On the bond market, prices fell with the rise in interest rates – hopes of relaxation in the Ukraine also weighed on prices, and yields rose as a result. Despite higher market interest rates, the price of gold rose – supported by the weakness of the dollar.
For the Apple stock it went up by 2.9 percent. Foxconn, the largest contract manufacturer of Apple’s iPhones, had partially resumed production at its factories in the Chinese city of Shenzhen. A Covid-19 outbreak and city lockdown had prompted the company and other manufacturers to shut down operations there this week.
at Eastman Kodak (6.2 percent) the business figures were positively received. The company had reported an increase in sales and a return to profitability for 2021. The defense technology shares of Lockheed Martin lost 6.1 percent – weighed down by hopes of a diplomatic solution to the Ukraine war. The papers from NortonLifeLock slipped 13.3 percent. The British competition authority wants to investigate the planned takeover of Avast in detail.