new York Evidence of movement in Russia-Ukraine ceasefire talks spurs investors into US equities. Stock marketers were also encouraged by China, which had declared that it would provide more economic stimulus and keep the markets stable. This led to a rally in US-listed Chinese stocks. However, the interest rate hike by the Federal Reserve dampened the buying mood.
The US blue chip index Dow Jones and the broad S&P 500 each rose about half a percent on Wednesday to 33,655 and 4294 points respectively. The tech-heavy Nasdaq advanced 1.6 percent. After the interest rate decision, the dollar index, which reflects the exchange rate with major currencies, rose slightly to 98.93 points. On the other hand, selling pressure increased on the bond market. This drove the yield on 10-year T-bonds to 2.214 percent.
The Fed raised interest rates by a quarter of a percentage point to a range between 0.25 and 0.5 percent. For the end of 2022, they announced an interest rate of 1.9 percent. The main focus is now on the forthcoming press conference by central bank chief Jerome Powell, said analyst Pierre Veyret from brokerage house ActivTrade. Because the Ukraine war put some of his previous forecasts in question. “Investors will follow his choice of words closely.”
In the bond market, eyes also turned to Russia as $117 million in interest payments on dollar bonds fell due during the day. According to Russian Finance Minister Anton Siluanov, the country made the payments. However, because of the invasion of Ukraine, the West imposed sanctions on Russia that make international money transfers more difficult.
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It would be the first default since the Russian Revolution of 1917, when the Bolsheviks refused to recognize czar-era debts. Russian foreign currency bonds with a total volume of around 40 billion dollars are currently in circulation.
China’s tech companies under pressure
On the subject of Ukraine, investors were encouraged by the prospect of a compromise to resolve the conflict. This pushed the price of US crude oil WTI down 0.5 percent to $95.96 a barrel (159 liters), which had already fallen 6.4 percent on Tuesday. “Indications of progress in the ceasefire negotiations are dampening fears of supply disruptions,” said analyst Stephen Brennock of brokerage house PVM Oil Associates. “But there is still a long way to go before hostilities end.”
On the other hand, prices for many other commodities rose as investors bet on accelerated growth in China, a key customer. The price of the industrial metal copper rose by 1.6 percent to $10,060 a ton. According to the Xinhua Agency, Chinese Deputy Prime Minister Liu He promised economic stimulus and support for the Internet-based industry. “China seems to have realized that it needs to do something to support its economy – something decent,” said Citibank investment strategist Mohammed Apabhai.
The prospect of less strict regulation brought price gains of up to 47 percent to US stocks from Chinese technology groups such as Alibaba, JD.com, Baidu and Pinduoduo.
The shares of NortonLifeLock, on the other hand, posted a drop of a good 14 percent at times, the biggest slide in prices since the stock market crash in March 2020. The British competition regulator wants the planned $8.6 billion takeover of rival Avast by the antivirus software provider because of it take a closer look at possible disadvantages for local consumers. Avast titles slipped around 13 percent in London.
More: Buy, sell or sit out? How investment professionals position themselves in times of crisis