Futures in the United States are trading higher today, subsequent to the Dow’s best day since March. Following last week’s bloodbath, the stock markets had a massive rebound in yesterday’s session. Fed officials forecasted on Wednesday that interest rates will be raised twice in 2023, from their current record low, triggering a market panic. The earlier-than-expected rate hike is a reaction to rising inflationary concerns generated by a faster economic recovery.
Stock Market
According to New York Fed President John Williams, the economy is undeniably strengthening at a rapid rate, and the medium-term outlook is very positive. The macroeconomic environment, however, has not changed sufficiently for the FOMC to relinquish its monetary policy position of robust support for the economic recovery.
The Dow Jones Industrial Average increased by 1.76%, while the S & P 500 increased by 1.4%.The Nasdaq, the tech-savvy index, hopped 0.79%.
Bitcoin
Bitcoin fell below $32,000 for the first time since June 8th. The People’s Bank of China has encouraged Alipay and other large institutions to crack down on cryptocurrency trading. According to reports, numerous bitcoin mines in Sichuan were shut down after China put a stop to crypto mining. The majority of bitcoin mines consume coal power, which has raised concerns about the digital currency’s potential environmental impact.
On the other hand, investor confidence in cryptocurrencies is growing. This is backed up by institutional investors, who are working to diversify their product portfolios in order to provide their clients with access to Bitcoin. Several surveys show that a growing number of hedge fund managers are willing to devote nearly 10% of their portfolio to cryptocurrencies.
Forex
The dollar fell from two-month highs on Monday, but remained above where it was prior to the Federal Reserve’s meeting on Wednesday, as investors debated whether the Fed’s perceived hawkish stance would hinder the currency’s downward trend. The dollar has risen in value following the Federal Reserve’s declaration that two rate hikes are expected in 2023.
Against a basket of currencies, the dollar index declined 0.44%. The euro increased by 0.41% to $1.1917, while the dollar advanced by 0.03% to 110.29 yen. The British pound gained 1.03% in value to $1.3933.
Gold
Spot gold is up 1.1%, while gold futures in the United States are up 0.8%. Last week, gold prices plunged 6%, the largest weekly % loss since March 2020. The dollar index has fallen from two-and-a-half-month highs, encouraging investors to turn to gold.
Oil Demand
On Monday, Brent crude for August rose 1.89% to $74.90 a barrel. In July, the price of West Texas Intermediate (WTI) crude rose 2.82% to $73.66 a barrel. Both standards have risen in recent weeks as a result of optimism about the rate at which Coronavirus vaccinations are being administered around the world. Oil spot premiums in Europe and Asia have reached multi-month highs as a result of the recovery.
Jerome Powell to appear before the House of Representatives.
Remember that Jerome Powell, the Chairman of the Federal Reserve, will speak before the House of Representatives on Tuesday. His words are likely to support the view that the Fed is about to begin considering the removal of some of the unprecedented stimulus measures deployed during the pandemic.
However, not everything is negative, as he will likely reiterate that the economy has improved steadily since the last Fed meeting. In addition to exceptional monetary and fiscal policy efforts, extensive vaccinations have provided significant support to the recovery. Indicators of employment and economic activity have continued to improve, and real GDP appears to be on course to grow at the quickest rate over the last ten years.
Bank of England
Inflation in the United Kingdom has risen above the Bank of England’s 2% target for the first time in over two years. Investors are unsure whether the Bank of England will respond with a hawkish stance subsequent to the Fed’s actions. It is important to note that the Bank of England is not catering to a similar rate of inflation, which is 5%, as seen in the United States. Despite this, the Bank of England has hinted that it is very likely to reduce its support by slowing the pace of bond purchases.
European Protectionism
The European Commission has prohibited ten banks from participating in the auction of bonds because they have been blamed for violating competition laws. The majority of the banned banks are American or British, with their headquarters in London. This sort of protectionism can prove to be disastrous for European banks, as the more inward-looking the EU financial markets become, the more likely they are to fall further.
Dow Jones
Many bluechip stocks in the Dow index rose by nearly 1%. American Express, Boeing, and Chevron were among the best performers, while Visa, McDonalds, and Apple were among the laggards.
Asian Stock Markets
Following the lead of stock markets in the United States, Asian stock markets jumped in early trading activity today. In Japan, the Nikkei 225 index surged 2.9% in morning trade, recovering from an almost 3% decline on Monday. The Shanghai Composite Index rose by nearly 0.72%. Hong Kong’s Hang Seng index increased by 0.02% while the Seoul Kospi rose by 0.69% as at 11.08 PM EST.