Yesterday, The US stock indices sharply jumped after the US Federal Reserve officially announced reducing its massive stimulus program. By the close of the trading session, the Dow Jones index increased by 0.29%, the S&P 500 added 0.65%, and the NASDAQ jumped by 1.04%. All three indices set new price highs.
According to the results of the Fed meeting, the US central bank will begin reducing its quantitative easing program in November and plans to end it in 2022. The Fed continues to believe that high inflation is “temporary” and will probably not require a rapid rise in interest rates. The Fed will begin reducing its monthly Treasury bond purchases by $15 billion a month and may accelerate the reduction in December if inflation continues to rise. Not much has been said about rate hikes. But according to analyst polls, the market is laying several rate hikes after the tapering ends. Analysts predict the first increase of the interest rate in the summer of 2022 and the second in the fall of 2022.
The main of yesterday’s speech by Fed Chairman Jerome Powell: “The spike in inflation was largely due to recent supply problems, not wage growth. The inflation we are experiencing is not related to the labor market. Global supply chains will recover, but the timing is uncertain. Our tools cannot mitigate the limited supply in the market. The pandemic supply and demand imbalance contributed to significant price increases in several sectors.”
The US became the third major economy (after Canada and Australia) to begin officially reducing its stimulus program.
Kerry Craig, a global markets strategist at JP Morgan Asset Management, noted yesterday that the tapering was not a tightening. He also added that the Fed’s balance sheet would still increase by about $400 billion over the next eight months, which is still a very favorable policy environment that will support the outlook for growth in equities for the coming quarters.
Yesterday, Ford notified about 32,000 workers in the US that they will need vaccinations by Dec. 8 or face unpaid leave.
Meta CEO Mark Zuckerberg said the 30% commission Apple’s charges for transactions made it difficult for creators to make money. Meta is launching a special promotional link for creators to keep all the money they earn.
Europe’s stock indices were traded without a single trend yesterday. Germany’s DAX ended trading with 0.03% growth, France’s CAC 40 added 0.34% and broke its historical record set in 2000. Italy’s FTSE MIB increased by 0.69%. Meanwhile, the British FTSE 100 decreased by 0.36%, and the Spanish IBEX 35 lost 0.82%.
The main of yesterday’s speech by ECB head Christine Lagarde: “In our expectations for interest rates, we have clearly laid out three conditions that must be met before rates start to rise. We continue to use PEPP to ensure favorable financing conditions and affordable borrowing costs for all economic sectors. Despite the current spike in inflation, the inflation forecast over the medium term remains restrained, and therefore these three conditions are unlikely to be met in the next year.” Given the ECB’s conservatism, Europe will remain soft on monetary policy for the longest time.
The Bank of England will hold its monetary policy meeting today. Analysts differ in their opinions. Most experts think that the Bank of England will not immediately raise interest rates, but it may reduce the stimulus program from November.
Oil prices fell yesterday as US crude inventories increased and in anticipation of the OPEC+ meeting to be held today. There is also mounting pressure on OPEC+ to expand production, but according to preliminary information, OPEC+ countries have no intention to increase oil production and will stick to their current plans.
Iran announced the resumption of negotiations on the nuclear agreement.
Yesterday, Japan’s Nikkei added 0.8% yesterday to a month high, while Chinese indices were burdened by a surge in new cases of coronavirus in China, which threatens to curb consumer spending in an already slowing economy.
Main market quotes:
- S&P 500 (F) 4,660.57 +29.92 (+0.65%)
- Dow Jones 36,157.58 +104.95 (+0.29%)
- DAX 15,959.98 +5.53 (+0.04%)
- FTSE 100 7,248.89 −25.92 (−0.36%)
- USD Index 93.85 −0.24 (−0.25%)
Important events for today:
- Australia Retail Sales (m/m) at 02:30 (GMT+2);
- OPEC+ Meeting (All Day);
- Eurozone Services PMI (m/m) at 11:00 (GMT+2);
- UK Construction PMI (m/m) at 11:30 (GMT+2);
- UK BoE Interest Rate Decision (m/m) at 14:00 (GMT+2);
- UK BoE Monetary Policy Report (m/m) at 14:00 (GMT+2);
- US Initial Jobless Claims (w/w) at 14:30 (GMT+2);
- Eurozone ECB President Lagarde Speaks at 15:00 (GMT+2);
- UK BoE Gov Bailey Speaks at 15:00 (GMT+2);
- US Natural Gas Storage (w/w) at 16:30 (GMT+2).
