Fed Chairman Jerome Powell officially announced for the first time that the regulator would raise rates at the March 16 meeting. The rate hike will be 25 basis points. When asked how the situation in Ukraine and sanctions against Russia would affect the US economy, he said it was too early to draw conclusions. Markets are now setting a zero chance that the Fed will raise the key rate by 50 bps all at once at the March meeting. A week ago, market participants estimated such a possibility at 41%. Speaking before the US House of Representatives Committee on Financial Services, Powell's comments reassured investors as the market initially expected faster rate hikes. As the stock market closed, the Dow Jones Index (US30) increased by 1.79%, the S&P 500 Index (US500) added 1.86%, and the NASDAQ Technology Index (US100) jumped by 1.62%.
Charles Evans, President of the Federal Reserve Bank (FRB) of Chicago, said that US inflation is likely to remain above 3% this year. Evans also added that the Fed would soon start cutting its balance sheets. Its volume is now about $9 trillion.
Russia continues to remain isolated from the civilized economic world. Foreign companies and investors are leaving the market. The country is sliding sharply downward and will soon join the sanctions club, where Iran and North Korea have long resided.
According to Ray Dalio, founder of Bridgewater Associates, economic sanctions imposed by Europe and the United States against Russia and its financial system will cause serious damage to the Russian economy and could even lead to political changes in Russia itself. The investor sees the Russian military invasion as a serious threat to the current world order while pointing to two concerns: whether this war will go beyond Ukraine and whether the NATO alliance will be involved in it. How China will respond is also an important factor.
European stocks continue to decline amid concerns about the effects of sanctions against Russia. Germany's DAX (DE30) decreased by 0.67%, France's CAC 40 (FR40) lost 0.11%, and the British FTSE 100 (UK100) decreased by 0.19%. The conflict in Ukraine could cut global gross domestic product by about one percentage point by 2023 and raise global inflation by 3% this year, the UK National Institute of Economic and Social Research estimated on Wednesday. Inflation in the Eurozone hit a record 5.8% last month, surpassing expectations and prompting policymakers' warnings about stagflation. The Producer Price Index, which measures the ratio between factories, increased from 3.0% to 5.2%. This is a significant jump, which will subsequently be reflected in higher consumer prices. The Eurozone unemployment rate fell from 7.0% to 6.8%.
The British FTSE excludes Russian companies from its indices.
More than a million people have already left Ukraine in the week after Russia's invasion of the country, Filippo Grandi, head of the UN refugee agency, tweeted.
Large foreign buyers are boycotting Russian oil because of the situation around Ukraine, trying to find alternative sources of supply, which is likely to increase energy prices further. Crude oil inventories last week showed a decline of 2.6 mln barrels. The supply shortage is getting worse.
Asian markets are rising today from the opening bell. Japan's Nikkei 225 (JP225) increased by 0.70%, Hong Kong's Hang Seng (HK50) added 0.70%, Australia's S&P/ASX 200 (AU200) rose by 0.49% today. Japan and South Korea joined economic sanctions on Russia.
Main market quotes:
S&P 500 (F) (US500) 4,386.54 +80.28 (+1.86%)
Dow Jones (US30) 33,891.35 +596.40 (+1.79%)
DAX (DE40) 13,906.62 -93.49 (-0.67%)
FTSE 100 (UK100) 7,409.58 -19.98 (-0.27%)
USD Index 97.54 +0.15 (+0.15%)
- – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+2);
- – German Services PMI (m/m) at 10:55 (GMT+2);
- – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
- – UK Services PMI (m/m) at 11:30 (GMT+2);
- – Eurozone Producer Price Index (m/m) at 12:00 (GMT+2);
- – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
- – Eurozone ECB Monetary Policy Statement (m/m) at 14:45 (GMT+2);
- – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
- – US Fed Chair Jerome Powell Testifies at 17:00 (GMT+2);
- – US ISM Services PMI (m/m) at 17:00 (GMT+2);
- – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
- – Canada BoC Maclem speaks at 18:30 (GMT+2).
by , 2022.03.03
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