At the close of the New York Stock Exchange, the Dow Jones index increased by 0.55%, the S&P 500 index added 0.17%, and the NASDAQ index decreased by 0.50%. The Nasdaq technology showed the drop since rising Treasury yields put pressure on major technology stocks. At the same time, gains in bank stocks and energy stocks helped limit broader market losses.
FOMC protocols are expected to be released today, along with a number of other important US economic data before tomorrow’s bank holiday. Any hints from the Fed to accelerate the pace of QE reduction or to raise interest rates could push the dollar index higher. If the pace of the cuts remains the same, the dollar index may start a technical correction.
A rise in the dollar index usually leads to higher government bond yields and lower gold and silver prices, which have an inverse correlation to Treasury yields. Gold has already dropped below $1800 per troy ounce and this downward trend is likely to continue.
European stock markets were mostly down yesterday. German DAX decreased by 1.11%, French CAC 40 decreased by 0.85%, Italian FTSE MIB lost 1.62%, Spanish IBEX decreased by 0.07%. The only exception was the British FTSE 100, which added 0.15%. In the UK, there is an increase in business activity. Data for October showed a rise in the manufacturing sector, while in the services sector the data was negative. With expectations of an interest rate hike from the Bank of England, the British pound might be strengthened soon.
After fixing a record daily sickness rate, Germany is considering options to tighten its anti-covids measures, including introducing regional lockdowns as the Netherlands has already done. Meanwhile, Germany has one of the lowest rates of vaccinated citizens in Western Europe. Analysts believe that a new wave of disease in Europe will cause more economic problems in December.
The United States, China, India, Japan, South Korea, and the United Kingdom plan to release oil from strategic reserves to decrease global oil prices. Biden’s decision to use the US strategic oil reserve calls for a release of 50 million barrels. But the long-awaited coordinated release of oil with other major consuming countries has so far only increased oil prices by more than 3%, which was unexpected for the White House. Analysts believe that the release of inventories is hardly enough to meet global needs. Barclays Bank raised its forecast for average oil prices for the next 2022 to $77 and $80 a barrel of WTI and Brent, respectively.
The Turkish lira dropped another 10% while continuing to fall, to 12 per dollar after Erdogan acted at lower interest rates. Turkey’s inflation rate is second after Venezuela and Zimbabwe.
On Wednesday, the Reserve Bank of New Zealand raised its interest rate by 25 basis points to 0.75%. Analysts had expected an increase of 50 b.p. This is the second rate hike within the last 2 months. This is the Central Bank of New Zealand’s response to the fight against inflation. New Zealand consumer prices increased to 4.9% in annual terms, well above the RBNZ target of 1.0-3.0%.
Asia-Pacific stock markets are decreasing in Wednesday trading. Technology sector companies are among the leaders of the fall on Asian exchanges because of the increase in government bond yields. The growth of government bond yields leads to an increase in the discount rate used for the valuation of shares. In addition, it affects the technology companies most of all because the perspectives of the rapid growth of profits are laid in these companies.
Main market quotes:
- S&P 500 (F) 4,690.70 +7.76 (+0.17%)
- Dow Jones 35,813.80 +194.55 (+0.55%)
- DAX 15,937.00 −178.69 (−1.11%)
- FTSE 100 7,266.69 +11.23 (+0.15%)
- USD Index 96.49 −0.06 (−0.06%)
Important events for today:
- Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
- New Zealand RBNZ Interest Rate Decision (m/m) at 03:00 (GMT+2);
- New Zealand RBNZ Monetary Policy Statement (m/m) at 03:00 (GMT+2);
- New Zealand RBNZ Press Conference at 04:00 (GMT+2);
- German Ifo Business Climate (m/m) at 11:00 (GMT+2);
- US Prelim GDP (q/q) at 15:30 (GMT+2);
- US Core Durable Goods Orders (m/m) at 15:30 (GMT+2);
- US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
- US PCE price index (m/m) at 17:00 (GMT+2);
- US New Home Sales (m/m) at 17:00 (GMT+2);
- US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+2);
- US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
- US Natural Gas Storage (w/w) at 19:00 (GMT+2);
- US FOMC Meeting Minutes at 21:00 (GMT+2).