Forex Analysis & Reviews: 08.09.2022 - Stock markets froze ahead of...

08.09.2022 11:56 AM

Stock markets froze ahead of central banks' rate decisions

Europe's stock indices went lower as investors braced for historic monetary tightening by the ECB today in the afternoon. The STOXX 50 index has lost 0.6% since the start of the session. The shares of banks and insurance companies gained the most, while the securities of retailers fell after Primark Associated British Foods Plc warned about lower profit.

US stock futures stayed almost unchanged when the S&P 500 and Nasdaq 100 rose by nearly 2% on Wednesday.

Treasuries stabilized after a period of growth as the governor of the Reserve Bank of Australia signaled a wind-down of aggressive rate hikes. Meanwhile, UK investors in bonds are waiting for more clues from the economic statement by UK Prime Minister Liz Truss. The upcoming economic package suggests a new wave of debt issuance to fund it, which, in turn, may boost bond yields.

Global central banks have to walk a tightrope by introducing steep rate hikes to tackle inflation while keeping the economy on the brink of a recession. The European Central Bank will be in close focus later in the day. According to Bloomberg Economics, the regulator may raise the rate by 75 basis points even despite the ongoing energy crisis.

The Fed officials confirmed their intention to take inflation under control. Fed's Vice Chair Lael Brainard said that the US central bank will have to raise interest rates to restrictive levels, while cautioning that risks would become more two-sided in the future. Jerome Powell will give a speech later in the day

Analysts at Goldman Sachs Group Inc. have raised Fed hike forecasts for this year. According to them, the Fed will hike the rate by 75 basis points this month and 50 basis points in November, up from their previous forecasts of a 50- and 25-basis-point increase. They also expect a 25-basis-point hike in December.

According to the Fed's Beige Book, the outlook for future economic growth remains generally weak although there are some signs of inflation slowdown.

Meanwhile in Asia, the stock market has recovered from its lowest level hit in 2020. The Japanese yen won back some losses after the country's monetary authorities discussed the prospects of global financial markets. A strengthening US dollar is perceived as a threatening factor by some Asian policymakers. Therefore, they might start looking for ways to protect the yen from a deeper drop.

In the commodities market, oil fell sharply amid worries related to the risk of growth-killing rate hikes from central banks and new covid restrictions in China. China's Chengdu extended a lockdown for a majority of its more than 21 million residents on Thursday.

What to watch this week:

European Central Bank rate decision, Thursday

Fed Chair Jerome Powell due to speak, Thursday.

Chicago Fed President Charles Evans and his Minneapolis counterpart Neel Kashkari due to speak, Thursday

EU energy ministers meeting on emergency intervention in electricity markets, Friday

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

If you have any content questions, please contact editorial-board@instaforex.com

# American markets #FTSE # European markets Stock Markets

Recommended Stories

Update on US stock market on May 8. SP500 and NASDAQ grow after Fed's policy meeting

Update on US stock market on May 7. Fed's policy decision on investors' radars

Update on US stock market on May 6, 2025

US stock market still growing

US market: modest but positive move

US stock market on May 2: S&P 500 and Nasdaq still battling volatility

US market: GDP shrinks, but Wall Street climbs

Stock Market for April 30th: S&P 500 and NASDAQ Continue Clinging to Any Positive News

The Stock Market Rally Should Not Be Misleading

Stock Market for April 29th: S&P 500 and NASDAQ Still Have Growth Potential

Top analytics