FOMC Minutes Indicate The Fed Will Be Less Aggressive In Raising Rates Further

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The US indices rose Wednesday after minutes from the Federal Reserve's November meeting showed support for a soon slowdown in rate hikes. According to the FOMC minutes, Federal Reserve officials expect to move to a smaller interest rate hike soon. The main reason is the concern that a rate hike could seriously affect financial stability and the economy. Markets had largely expected the Fed to reduce the intensity of its policy tightening, and the FOMC minutes confirmed this. About 80% of traders expect the Federal Reserve to slow the pace of rate hikes to 0.5% in December. This has largely restored investors' interest in risky assets and the stock market. As the stock market closed, the Dow Jones Index (US30) increased by 0.28%, and the S&P 500 Index (US500) added 0.59%. The Technology Index Nasdaq (US100) gained 0.99% yesterday.

The US business activity declined for the fifth straight month, with new orders falling to their lowest level in 2.5 years as higher interest rates slowed demand. The US Real Estate Market is under pressure from mortgage rates that have more than doubled since last year. Many economists expect the United States to slide into recession next year as higher borrowing costs slow economic activity. But the labor market remains strong. The US jobless claims rose to 240,000, the highest level since August. Employers added 261,000 jobs last month and are creating an average of almost 407,000 jobs a month this year, which is very high.

Stock markets in Europe were mostly up Tuesday. Germany's DAX (DE30) gained 0.04%, France's CAC 40 (FR40) added 0.32%, Spain's IBEX 35 Index (ES35) increased by 0.07%, Britain's FTSE 100 (UK100) closed up by 0.17% yesterday.

The Eurozone index of business activity in the manufacturing sector rose from 46.4 to 47.3, while in the service sector, it remained at 48.6. The biggest drop among the major economies was registered in France, while Germany posted an increase. Despite the energy crisis and high inflation, businesses are finding ways to stay afloat. This is a positive sign for the economy of the region.

The President of Moldova, Maia Sandu, commented on the blackout in Moldova after Russian missile strikes on Ukraine's energy system (Moldova's energy system is highly dependent on Ukraine). "Russia has left Moldova in the abyss. We cannot trust a regime that leaves us in darkness and cold, that deliberately kills people out of a simple desire to leave other nations in poverty and humiliation," Sandu said.

The European Parliament yesterday passed a resolution recognizing Russia as a state sponsor of terrorism. Russia is gradually being isolated to the level of North Korea.

Negotiations among European Union countries on where to set a price ceiling on Russian oil stalled Wednesday as governments disagreed on how to work out a plan. The EU executive proposed a $65 barrel level, which Poland and the Baltic States rejected as too generous to Moscow. But several countries with large shipping industries, including Greece, do not want to drop the price below $70, the upper end of the range the EU proposed earlier Wednesday. More talks are scheduled for Thursday.

Crude oil prices fell 4% yesterday on reports that the G7 countries are considering setting a much higher-than-expected range of $65 to $70 a barrel as the upper limit for the selling price of Russian oil. Traders initially speculated on a $50-60 range for a price cap. The price cap and the EU's proposed embargo on Russian oil are expected to take effect on December 5, the day after the OPEC+ oil producers' alliance meets to revise production quotas.

Asian markets rose mostly yesterday. Japan's Nikkei 225 (JP225) was not trading on Wednesday due to the holiday, Hong Kong's Hang Seng (HK50) was up by 0.57% yesterday, and Australia's S&P/ASX 200 (AU200) closed up by 0.70% by the end of the day.

China is struggling with a record-high daily increase in infections, which has led to the reintroduction of restrictions in several major cities. Experts predict a decline in economic indicators for the quarter.

  • S&P 500 (F) (US500) 4,027.26 +23.68 (+0.59%)
  • Dow Jones (US30) 34,194.06 +95.96 (+0.28%)
  • DAX (DE40) 14,427.59 +5.24 (+0.036%)
  • FTSE 100 (UK100) 7,465.24 +12.40 (+0.17%)
  • USD Index 106.12 -1.10  (-1.03%)

Important events for today:

  • Japan Manufacturing PMI (m/m) at 02:30 (GMT+3);
  • Japan Services PMI (m/m) at 02:30 (GMT+3);
  • German Ifo Business Climate (m/m) at 11:00 (GMT+3);
  • ECB Account of Monetary Policy Meeting at 14:30 (GMT+3);
  • New Zealand Retail Sales at 23:45 (GMT+3).

More By This Author:

The RBNZ Raised The Interest Rate By 0.75% And Is Not Going To Stop
Analytical Overview Of The Main Currency Pairs - Tuesday, Nov. 22
The RBNZ Is Preparing To Raise The Interest Rate By 0.75%

Disclosure: 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, ...

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