Historic decision to raise interest rates by 50 basis points

2022-05-05T18:00:27
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Historic decision to raise interest rates by 50 basis points and positive reaction in global markets

Oil and commodity markets continue to grow, and Asian markets have also risen on the back of the Fed’s decisions
Although the sixth expected package of EU sanctions against the Russian Federation has not yet been agreed upon
it may be less acute, as there is no alternative to Russian oil on the global market
Therefore, we can expect a slight rebound in the stocks of Russian oil companies

Evest follows market developments in the following report

topic

Historic decisions

Wall Street makes the best daily gain over two years

Positive trading in Asia

Oil continues to rise ahead of the OPEC meeting

 

 

Historic decisions

The Federal Reserve System raised the federal funds rate by 50 basis points
now with a range of 0.75-1% annually
the Federal Open Market Committee (FOMC) said in a statement following the May meeting’s results

The decision coincided with the predictions of economists and market participants

In March, the Fed raised interest rates by 25 basis points
The last time the United States Central Bank raised the interest
rate was following the results of two consecutive meetings in 2006
as it had not risen by 50 basis points at once since 2000

On Wednesday, central bank officials also announced their intention to
“begin reducing the government bond portfolio, debt obligations of state structures
and mortgage-backed debt bonds on June 1,” according to the report

The Fed encouraged investors by giving less acute signals about additional monetary policy actions
In particular, the Federal Reserve’s balance sheet reduction program will begin on June 1
and in the first three months, the reduction will reach $47.5 billion
half of the initial target of $95 billion

This further reduction is expected from September

In addition, the regulator will consider raising the price at the next meeting by 50 basis points
with projections of an increase of 75 basis points

The Fed’s outcome is likely to support markets for some time
However, tighter monetary policy and a reduced regulator’s
balance sheet will increase the cost of dollar financing and liquidity flow from markets
which is negative for a wide range of risk assets in the medium term

Global markets are reclaiming positive expectations from the Fed
but it is too early to talk about creating a reverse trend
We can consider the Bank of England’s decision on
the interest rate as important news that can have an impact on global markets

artical name Historic decision to raise interest rates by 50 basis points

 

 

Wall Street makes the best daily gain over two years

In the United States, stock indices rose by 2.8-3.2% on the eve of the day
the best daily gain since 2020, according to the Wall Street Journal

The US Federal Reserve raised the federal funds rate (the federal funds rate) by 50 basis points (up to 0.75-1% annually)
which coincided with the expectations of economists and market participants
On Wednesday, central bank officials also announced their intention to
“begin reducing the government bond portfolio
debt obligations of state structures and mortgage-backed debt bonds on June 1

Federal Reserve Chairman Jerome Powell expressed confidence that the US economy is very strong and will be able to withstand the increase in interest rates
during a press conference after the regulator’s meeting

He said an additional 50 basis points increase in the cost
of lending would be considered at the Fed’s next few management meetings

In the meantime

according to him, an increase of 75 basis points at once was not agreed upon
This surprised the market, with the likelihood of such a move at the next meeting
in June estimated at about 95%, based on base price futures

Powell also noted that the Fed has tools to control inflation

In addition, US central bank leaders announced their intention to begin
reducing the portfolio of government bonds
debt obligations of state structures and mortgage-backed debt bonds on June 1
This is due to the fact that the assets in the Federal
Reserve’s balance sheet have reached a massive $9 trillion

On Friday, official data on the state of the labor market last month will be released
Experts expect that the number of jobs in the country’s
economy has raised by 394-400 thousand
while unemployment has fallen to 3.5% from 3.6% in January

artical name Historic decision to raise interest rates by 50 basis points

 

 

Positive trading in Asia

Positive indices also dominated Asian stocks on Thursday
but exchanges in Japan and South Korea were closed due to Children’s Day

China’s Shanghai Composite Index rose by 0.7%
and Hong Kong’s Hang Seng added 0.5% due to weaker expectations
of a more severe prime interest rate hike 

The German Economy Ministry reported that the volume of industrial orders
in Germany in March fell by 4.7% compared to the previous month
Analysts expected an average milder decline of 1.1%, according to Trading Economics

artical name Historic decision to raise interest rates by 50 basis points

 

 

Oil continues to rise ahead of the OPEC meeting

Prices in the oil market continue to rise ahead of the OPEC + meeting in the Asian session on Thursday

 The previous day, prices had jumped 5% under EU plans to impose an embargo on fuel imports from Russia

Brent crude futures’ cost for July was $110.81 per barrel (+ 0.6% and 4.9% on Wednesday)
and West Texas Intermediate crude for June was $108.31 per barrel
(+ 0.5% and + 5.3% the previous day)

At the OPEC+ meeting

 a decision on a slight increase in production is expected
Experts from the OPEC + technical committee recommended adhering to the alliance’s
plan to increase the share of oil production by 432 thousand barrels per day in June

A ministerial committee of OPEC + will convene today, Thursday
to review the Technical Committee’s report and make recommendations
on a wide-ranging OPEC + ministerial meeting to be held later in the day

As European Commission President Ursula von der Leyen said on Wednesday
the European Commission considers it necessary to ban the import
of all Russian oil by European Union states under the next sixth package of
sanctions against the Russian Federation

Bloomberg also stated that European countries may prevent their companies
from providing services to Russia in transporting their oil
including insurance services

artical name Historic decision to raise interest rates by 50 basis points

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