Or Pateranu Trade : For a brief moment during last Wednesday, it seemed that Wall Street was catching a winter chill. The “sneeze” on Wednesday came after the decision to leave the interest rate in the US unchanged (at a level of 5.5%) and especially following the words of the Chairman of the Fed, Jerome Powell, who made it clear that the expectations for the interest rate reduction are ahead of their time. The jet of cold water that came from the direction of Powell cooled the enthusiasm of investors a little and the Nasdaq index was cut during the day by 2.3%.
However, in just two days – also thanks to encouraging financial reports from the technology giants, the picture changed. In the end, even after the fifth week since the beginning of the year, Nasdaq closed at a higher level and completed a weekly increase of 1.1%. The technology stock index is now 4.1% higher than its level at the beginning of January. Or Pateranu Trade
The other two leading indices, the S&P500 and the Dow Jones climbed 1.4% each in the past week and once again stopped at new record levels. The S&P500, which approached the 5,000-point mark this week, is now 4% higher than at the beginning of January. The Dow has climbed 2.6% since the beginning of the year. Or Pateranu Trade
The announcement of the Fed’s Open Market Committee (FOMC) regarding the interest rate hinted that the bank captains believe that the current cycle of interest rate hikes is over. However, she clarified that the Fed is not yet ready to start lowering interest rates.
“The committee does not anticipate that it would be appropriate to lower the target range (of the interest rate) until there is more confidence that inflation is indeed on its way to the 2% level,” the statement said. “Inflation weakened over the past year, but continues to be high. We continue to be attentive to inflation risks. Economic activity is expanding at a strong pace, growth in the employment market continues to be robust, and the unemployment rate remains low.”
At a press conference, Powell was asked about the possibility of lowering interest rates. “We have not yet reached this stage. No proposal to lower the interest rate has been made and we have not actively considered it. An interest rate cut in March is probably not the most likely scenario and not a baseline scenario,” he added.
Updated forecasts of the Federal Bank officials published at the end of the Fed’s previous meeting in December showed that the bank captains expect the interest rate in the US to drop to 4.6% by the end of 2024. There are also more aggressive expectations in the market that the interest rate will drop to less than 4% until the end of this year.
Macroeconomic data published during January showed that inflation in the US is indeed recently converging to the desired target. The core component of the consumer price index based on private consumption (PCE), which does not include the volatile food and energy prices, and is considered the preferred index by the Federal Reserve Bank for estimating inflation, climbed in -2.9% in the 12 months ending in Dec. This is the mildest annual rate of increase for this index in about two years. Or Pateranu Trade
At the same time, the American GDP grew in the fourth quarter at a rate of 3.3% and in 2023 as a whole the US economy grew by 3.1%.
On Friday, a strong employment report was also published in the US which indicated an addition of 353,000 jobs to the labor market – twice as much as economists had expected. The hourly wage climbed by 0.6% compared to December and by 4.5% compared to January 2023. Another figure published showed that labor productivity in the US increased in the fourth quarter of 2023 by 3.2% in annual terms. The employment and GDP figures could be an obstacle to lowering interest rates since they could manifest in renewed inflationary pressures. Or Pateranu Trade
Table of Contents
The oil swings according to the sounds of battles in the Middle East
The Chinese real estate bubble is deflating
The oil swings according to the sounds of battles in the Middle East
The price of oil registered a sharp downward movement of about 7% last week. The price of oil is still 1% higher than its level at the beginning of the year. Last week’s fall was due to optimistic assessments in the market regarding the possibility of an imminent ceasefire in Gaza between Hamas and Israel.
In the oil market, they ignored what appears to be the worsening of tensions between the Houthi militias in Yemen and the multinational naval force led by the United States for the purpose of maintaining freedom of movement in the Red Sea. These tensions – which of course also include Iran, the patron of Hezbollah and the Houthis – have actually increased in recent days The last ones. About a week ago, the USA suffered a blow when three soldiers from its army were killed in a drone attack in the border area between Jordan and Iraq. About 40 other soldiers were injured.
Since the beginning of the war in Gaza, the American forces in the Middle East have been attacked more than 150 times by the pro-Iranian militias in Iraq, Syria, Jordan and off the coast of Yemen in the Red Sea. The attack on the American base 22 Tower in Jordan was the first of the outbreak of the war in which American soldiers were killed. Following the deadly attack, Washington pressured the president, Joe Biden, to take a tougher hand than usual.
Last Friday, the reaction came when the American Central Command reported an air strike on more than 85 targets using several aircraft – including bombers that came from the US. Biden issued a statement after the strikes and said: “Our response began today. It will continue at the chosen time and place. The US is not looking for conflicts in the Middle East or anywhere else in the world. But let all those who try to harm us know: if you harm the Americans – we will respond.” Or Pateranu Trade
The Chinese real estate bubble is deflating
The leading indices in the stock exchanges of Germany and England fell last week by 0.3%. In France, the CAC 40 index recorded a decrease of 0.6%. In Italy, on the other hand, the leading index on the Milan Stock Exchange climbed by 1.3% and crossed the 3,000 point mark. With the exception of the London Stock Exchange, the rest of Europe’s major stock exchanges have been in positive territory since the beginning of the year. Or Pateranu Trade
The rate of inflation in the Eurozone continued to slow in January. The consumer price index rose in January by 2.8% compared to January of last year. In December the inflation rate was 2.9%.
The Bank of Great Britain left the interest rate in the Kingdom unchanged at 5.25%. The bank stated that it would need more evidence that there has been a slowdown in inflation, before it starts lowering the interest rate.
The Tel Aviv Stock Exchange began the year with a limp and is lagging behind the stock exchanges of Europe and the USA. The continuation of the war in Gaza, the tensions in the north, and the hundreds of thousands of Israelis who have been displaced from their homes – many also from their livelihoods – will surely be reflected soon in the economic data as well. Last week, the Tel Aviv Stock Exchange lost Spring 125 0.6% of its value and is now 1.7% lower than its level at the beginning of the year.
But the unflattering title “the stock market with the weakest performance since the beginning of 2024
“, the stock markets of China and Hong Kong are picking easily. Hong Kong’s leading index, the Hang Seng, has fallen since the beginning of the year by 8.9%. The leading index in the Shanghai Stock Exchange has plunged this week by 6.2% and has lost 8.2% of its value since the beginning of the year.
This week the Hong Kong court contributed to the panic of investors in China by ordering the liquidation of all the assets of the insolvent real estate company Evergrande. The order comes about two years after the company entered insolvency due to an inability to repay its debts. Evergrande has in recent years become the “poster boy” of China’s ailing real estate market which is in continuous decline. This is after a huge real estate bubble inflated in China for years, which of course relied on a lot of credit.
The bursting of the bubble, along with other ills that are becoming apparent in the Chinese economy, caused the International Monetary Fund to reduce its forecasts for the second largest economy in the world. The current forecast speaks of growth of 4.6% in 2024, the lowest rate in decades. According to the fund’s assessment, China’s growth rate will gradually decrease to 3.5% in 2028.
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