The Bank of Japan kept interest rates unchanged. The European Central Bank will raise interest rates today :: InvestMacro

by just forex

Wall Street closed higher yesterday thanks to a jump in technology stocks amid upbeat earnings. At the close, the Dow Jones (US30) was up 0.15%, and the S&P 500 (US500) was up 0.59%. The Nasdaq Tech Index (US100) jumped 1.58%. According to Definitiv, the S&P 500 (US 500) will show a 5.9% year-over-year gain in this earnings season, down from estimates of 6.8% at the start of the quarter. Unconstrained inflation initially led markets to estimate a 100 basis point rate hike at the upcoming Fed meeting next week, but the 80% probability is now on the 75 basis point hike side.

Shares of electric car maker Tesla Inc rose 2% in extended trading after reporting higher quarterly earnings. Danaher (DHR), AT&T (T), Philip Morris (PM), Union Pacific (UNP), Blackstone Group (BX), Intuitive Surgical (ISRG), and Snap (SNAP) will report today.

Most stock markets in Europe fell on Wednesday. Germany’s DAX (DE30) fell 0.20% yesterday, France’s CAC 40 lost 0.27%, Spain’s IBEX 35 (ES35) shed 1.18%, and Britain’s FTSE 100 (UK100) closed 0.44% lower.

According to the German Federal Statistical Office (Destatis), producer prices for manufactured goods increased by 32.7% in June 2022 from June 2021. In monthly terms, producer prices increased by 0.6%. In the UK, the CPI came to 9.4% y/y compared to 9.1% in May. The monthly inflation rate increased by 0.8%. The largest increasing contributions to the annual rate of inflation have been household services (mainly electricity, gas and other fuels) and transportation (mainly due to higher gasoline and diesel prices). This level of inflation was last seen in the country in March 1991. It is very likely that the Bank of England will raise the interest rate immediately by 0.5% at its next meeting.

Today is the much awaited ECB rate meeting where the ECB will raise interest rates. The single currency has risen about 2% in the last three trading sessions on expectations that the European Central Bank may raise interest rates dramatically by 50 basis points, as well as Reuters reports that a major Russian gas pipeline will open on time after maintenance. But most likely, Christine Lagarde, president of the European Central Bank, will not risk her reputation, so it is easier for the ECB to hold the first 0.25% increase and the ones that follow already at 0.5% or even 0.75%. Investors will also be interested in the so-called “anti-fragmentation” package, which is expected to be announced along with the rate decision.

On Wednesday, the European Union urged member states to cut gas use by 15% by March as an emergency measure after President Vladimir Putin warned that Russian supplies passing through Europe’s largest pipeline could be cut off or even halted.

Italian Prime Minister Mario Draghi won a vote of confidence in the Senate on Wednesday, but the three main coalition parties refused to participate.

Oil prices are falling as demand concerns outweigh limited supply. US crude oil inventories rose by 3.5 million barrels last week, well above analyst expectations.

Asian markets were mostly higher yesterday. Japan’s Nikkei 225 (JP225) is up 2.67%, Hong Kong’s Hang Seng (HK50) is up 1.11% and Australia’s S&P/ASX 200 (AU200) is up 1.65%.

The Bank of Japan kept interest rates and monetary policy unchanged. The monetary policy report highlights concerns about the economy above any potential impact on the yen. The Bank of Japan lowered its economic growth forecast for this year, so the sluggish economy needs continued support. Inflation expectations were 2.3% for the end of the year. So the BoJ is still targeting stimulus, despite the wave of interest rate hikes by other central banks. But it should be noted that there are some changes in the board of directors of the Bank of Japan. The government announced on Tuesday that it will appoint Hajime Takata and Naoki Tamura as new members of the Bank of Japan’s board of directors. Both representatives criticize excessive easing policies, especially Takata-san. Therefore, there is a possibility that there will be a change in the BOJ’s speech soon.

China’s economic outlook remains fragile, fueling negative sentiment around the world as well. Although China is recovering quickly from strict Covid restrictions, concerns about the housing sector and the high potential for new restrictions are eroding confidence and keeping consumers on edge.

S&P 500 (F) (US500) 3,959.90 +23.21 (+0.59%)

Dow Jones (US 30) 31,874.84 +47.79 (+0.15%)

DAX (DE40) 13,281.98 26.43 (0.20%)

FTSE 100 (UK100) 7,264.31 −31.97 (−0.44%)

US dollar index 107.08 +0.40 (+0.37%)

Important events for today:

  • – BoJ forecast report at 06:00 (GMT +3);
  • – Bank of Japan interest rate decision at 06:00 (GMT +3);
  • – Bank of Japan press conference at 06:00 (GMT +3);
  • – Eurozone monetary policy statement by the European Central Bank at 15:15 (GMT +3);
  • – European Central Bank interest rate decision in the eurozone at 15:15 (GMT + 3);
  • – US Initial Jobless Claims (w/s) at 15:30 (GMT +3);
  • – US Philadelphia Fed Manufacturing Index (MoM) at 15:30 (GMT +3);
  • – European Central Bank press conference in the eurozone at 15:45 (GMT +3);
  • – US natural gas storage (w/w) at 17:30 (GMT +3).

by just forex

This article reflects a personal opinion and should not be construed as investment advice and/or a continuing offer and/or solicitation to carry out financial transactions and/or guarantee and/or anticipation of future events.

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