The Bank of England continues to raise rates. ECB may raise the interest rate by the end of 2022

The US stock indices ended Thursday's trading with a decline. The Dow Jones (US30) decreased by 1.45%, the S&P 500 (US500) fell by 2.44%, and the NASDAQ technology index (US100) lost 3.74% at the close of the stock market. The disappointing results and an unclear outlook for Meta Platforms (Facebook) dampened market sentiment and left investors worried about other tech companies. But after the market closed, futures on indices jumped sharply on Amazon's report. The company increased its net income for 2021 by 57%. Amazon shares jumped 14.3% and returned some optimism to investors.

Data from the Institute for Supply Management (ISM) showed that the US Non-Manufacturing Services Business Activity Index fell to 59.9 points in January 2022 from its December level of 62.3. Experts' consensus forecast was for a stronger drop to 59.5 points. The initial jobless claims in the USA were 238,000 (the forecast was 245,000, the previous 260,000). The US economy shows the recovery, with inflation expectations declining against the background of the upcoming rate hike by the Fed. The US non-farm payrolls report will be released today, so traders should be cautious as volatility will increase. December's data was disappointing, showing only 199,000 new jobs. Analysts expect January's figure to be even lower at 110,000 jobs. But if the data turns out to be better than forecast, this will significantly boost the stock market.

European stock markets closed in the red zone yesterday. The statement of the European Central Bank was negative for the markets. The ECB left monetary policy unchanged. But it is reported that a possible policy review may occur in March as inflation continues to rise in the region. At the ECB's press conference, Christine Lagarde said it is wise not to rule out a rate hike in 2022, as March and June will be crucial for inflation assessments. Considering that the ECB has changed its rhetoric, investors are betting on a 40 basis point interest rate hike by December. The European currency increased sharply on the back of such statements, and major European stock indices went down.

German DAX (DE30) decreased by 1.6%, French CAC 40 (FR40) lost 1.5%, Spanish IBEX 35 (ES35) fell by 0.3%. As expected, the Bank of England raised the interest rate by another 0.25% to 0.5% to accelerate the slowdown in inflation. The bank will also complete a £20 billion corporate bond sale by the end of 2023. Inflation will remain above 5% until the end of the year. Traders have increased their bets on future borrowing cost increases, and markets now expect the Bank of England to raise interest rates to at least 1% by May and 1.5% by November. On that news, the British pound gained support, while British FTSE 100 (UK100) decreased by 0.63% by the end of the day.

The price of Brent crude oil reached $91 per barrel for the first time since October 2014. "WTI oil jumped above the $90 level after an Arctic storm reached Texas and disrupted oil production in the Permian Basin," said Edward Moya, senior market analyst at OANDA. Geopolitical tensions in Eastern Europe and the Middle East also drive up oil prices. However, in the medium term, some analysts expect a surplus in the oil market as early as next quarter, which will help to slow the recent surge in prices.

Gold now behaves inadequately. On the one hand, the US Federal Reserve System is getting ready to raise the rates, which will lead to the growth of the dollar index and government bond yields and reduction of gold and silver prices. On the other hand, the ECB has hinted that it may change its dovish stance and raise interest rates by the end of 2022. In Britain, the Bank of England raised interest rates. On the third side, investors bought gold as a hedge against inflation, but inflation expectations have already started to decline amid more decisive actions of central banks. It is quite difficult to predict how gold and silver will behave in such a situation, but most analysts are still inclined to believe that gold will have a downward trend this year.

After the stock market closed, Asia-Pacific (APAC) stock markets rose in trading Friday after a sharp rebound in US futures on indices. Japan's Nikkei 225 (JP225) gained by 0.73% and Australia's S&P/ASX 200 (AU200) added 0.6%. Consumer prices (inflation rate) in South Korea in January 2022 was 3.6% in annual terms. Thus, the growth rate slowed down from 3.7% in the previous month, although analysts had expected a decrease to 3.3%. South Korea's Kospi index jumped by 1.57% in today's trading.

Main market quotes:

S&P 500 (F) (US500) 4,477.44 −111.94 (−2.44%)

Dow Jones (US30) 35,111.16 −518.17 (−1.45%)

DAX (DE40) 15,368.47 −245.30 (−1.57%)

FTSE 100 (UK100) 7,528.84 −54.16 (−0.71%)

USD Index 95.34 −0.59 (−0.62%)

• - Australia RBA Monetary Policy Statement (m/m) at 02:30 (GMT+2);
• - UK Construction PMI (m/m) at 11:30 (GMT+2);
• - Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
• - US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
• - US Unemployment Rate (m/m) at 15:30 (GMT+2);
• - Canada Unemployment Rate (m/m) at 15:30 (GMT+2);
• - Canada Ivey PMI (m/m) at 17:00 (GMT+2).

by JustMarkets, 2022.02.04

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.