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. The interest rate hike by the Fed only temporarily dampened the mood to buy.
The US standard index Dow Jones closed 1.55 percent up on Wednesday at 34,063 points. The broader S&P 500 even gained 2.2 percent and closed at 4357 points. The tech-heavy Nasdaq advanced 3.7 percent. After the interest rate decision, the dollar index, which reflects the exchange rate with major currencies, briefly rose to 98.93 points, but closed 0.55 percent lower. On the other hand, selling pressure increased on the bond market. This drove the return on ten-year T-bonds to 2.183 percent in the meantime.
The US Federal Reserve (Fed) announced in the evening a key interest rate hike of 0.25 percentage points to a range of 0.25 to 0.5 percent. It is the first interest rate hike since December 2018. More are likely to follow, as the statement states.
“The US economy is very strong and quite capable of withstanding tighter monetary policy. The probability of a recession is currently not particularly high,” said Fed Chair Jerome Powell in the subsequent press conference. Nonetheless, Powell emphasized being cautious and prudent in order to be able to react quickly to possible unforeseen developments.
Top jobs of the day
Find the best jobs now and
be notified by email.
Overall, the Fed is preparing investors to raise interest rates by 0.25 percentage points at each of the six further meetings this year. The US interest rate would then be in the range of 1.75 to 2 percent at the end of the year. In December, Fed members had expected three rate hikes on average.
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.
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.
Individual values in focus
The prospect of less strict regulation gave US stocks of Chinese technology companies such as AlibabaJD.com, Baidu, or Pinduoduo Price gains of up to 47 percent.
The papers from NortonLifeLock on the other hand, with 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 possible disadvantages for the take a closer look at local consumers. Avast titles slipped around 13 percent in London.
The shares of Berkshire Hathaway closed above the $500,000 mark for the first time on Wednesday. Star investor Warren Buffett’s conglomerate gained 1.18 percent for the day and closed at $504,036 per share.
More: Buy, sell or sit out? How investment professionals position themselves in times of crisis