On the New York Stock Exchange, investors seem to have confidence in the Fed's policy and assessment. As a result, stock indices continued to rise even after the interest rate turnaround. The Dow Jones Industrial closed +1.23% higher at 34'480.76 points, just below the daily high. The same picture was seen in the market-wide S&P 500, which gained +1.23% and went out of trading at 4'411.67 points. The technology indices on the Nasdaq were also able to gain. Against the background of increased risk appetite of investors, the yield on ten-year US government bonds settled at 2.2%. In Asia, a mixed picture without a clear trend was seen at the end of the week after the recent gains.
The British central bank countered the further increase in inflationary pressure with a third tightening of monetary policy. As expected, the Bank of England raised its key interest rate by a quarter of a percentage point to +0.75%. The decision in the top monetary policy body was made by eight votes to one. The central bank in London also stressed that the impact of the war in Ukraine is likely to exacerbate both the inflation peak and the negative impact on economic growth. Given the lower visibility in the economic outlook due to the Ukraine crisis, Governor Andrew Bailey was somewhat more cautious about raising interest rates further. As a result, yields on British bonds declined and the pound came under pressure. Meanwhile, the British stock market, contrary to the trend on Europe's stock exchanges, posted moderate gains yesterday.
Despite the Fed's interest rate turnaround and in view of the difficult-to-assess impact of geopolitical uncertainty, the Japanese central bank is sticking to its extremely loose monetary policy for the time being. Although the price level in Japan has shifted upward due to the massive increase in energy costs, the inflation target of two percent pursued by the central bank is still not being achieved.
The central bank in Ankara left its key interest rate unchanged at 14% despite an inflation rate of over 50%. Already since the beginning of the year, the Turkish central bank has not reacted. This is even though Turkey is suffering from the recent rally in commodity markets due to its dependence on energy imports. After the interest rate decision, the Turkish lira extended its losses, thus causing further price pressure.
In the euro countries, the annual inflation rate was +5.9% in February, as confirmed by Eurostat, the statistical office, in a second release (first estimate +5.8%). This means that inflation reached a record level, i.e. the highest level since the introduction of the euro in 1999. Energy prices, which had increased by +32% in February on an annual basis, continue to drive the strong price increase. The core rate, i.e. excluding energy and food, climbed from +2.3% at the beginning of the year to +2.7% in February. On April 14, the European Central Bank (ECB) will announce its further course of action. It will then become clear whether the ECB will be forced to adopt a restrictive stance more quickly than previously anticipated due to the unchecked rise in inflation.
According to the calculations of the Organization for Economic Co-operation and Development (OECD), the war in Ukraine could reduce global economic growth by about one percentage point in the first full year after the conflict began, while raising inflation by nearly 2.5 percentage points. Refugee flows also represent a humanitarian disaster and a high economic risk. According to the OECD, taking in three million refugees would reduce the gross domestic product in the EU by at least 0.25% on average in the first year since the conflict began. In addition, as a result of the war, there is a great risk of economic crises in countries that are heavily dependent on wheat exports from Russia and Ukraine.
|07:30||JP||Bank of Japan Press Conference on Monetary Policy|
|11:00||EZ||Trade Balalnce (January)||EUR -4.6bn|
|15:00||US||Leading Indicator (February)||-0.3%|
|15:00||US||Existing Home Sales (February, m/m)||+6.7%|
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: email@example.com
Source: LGT Bank (Switzerland) Ltd.
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