Report of the Fed Made Markets Slump

Report of the Fed Made Markets Slump

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Today we'll talk about the results of the US Fed's meeting, the forecasts they voiced, and the reaction of global markets to the new information. Let's get started.

The meeting of the Fed

On June 16th, the Federal Reserve published the minutes of their meeting on credit and monetary policy. This document presents the results of the two-days meeting of the independent regulator.

Important report details

  • One of the most important points of the report was an increase in the forecast of the yearly inflation in 2021-2023. The expected result for this year was increased from 2.4% to 3.4%. The forecast for the next year was revised from 2% to 2.1%, and for 2023 - from 2.1% to 2.2%.
  • Moreover, they claimed that the next increase in interest rate is near: analysts say that two increases will have happened not by the end of 2024, but by the end of 2023 already. The rate will reach 0.6%. As for now, however, the range of the rate has not changed - 0-0.25%.
  • An increase in forecasts did not only touch upon inflation and interest rates, it also had to do with the GDP. This year, it is expected to amount to 7%, which is 0.5% more than expected earlier. The forecast unemployment rate for this year didn't change - 4.5%.

Reaction of the US market

The minutes presented on June 16th provoked a decrease in the indices:

  • Dow Jones Industrial Average (DJI) - 0.77%, to 34033.67 points;
  • S&P 500 (SPX) - 0.54%, to 4223.7 points;
  • NASDAQ Composite (IXIC) - 0.24%, to 14039.68 points.

On June 17th, Dow Jones and S&P 500 went on declining by 0.62% to 33823.45 and 0.04%to 4221.86 points, respectively. As for NASDAQ Composite, it grew by 0.87%to 14161.35 points.

Reaction of the European market

On June 17th, after the report was published, almost all European indices slumped:

  • STOXX 600 (STOXX): -0.12% to 459.33 points;
  • FTSE 100 (FTSE): -0.44% to 7153.43 points;
  • DAX (GDAXI): -0.12% to 15710.57 points;
  • CAC 40 (FCHI): +0.20% to 6666.26 points.

Today, when I was preparing the article, the trend remained negative: STOXX 600 lost 0.07%, FTSE 100 - 0.2%, DAX - 0.1%, CAC 40 - 0.03%. Yesterday and today, the shares of the tech sector, communal services, and the mining sector suffered most.

Reaction of the Japanese market

On June 17th, Japanese indices also reacted by losing several points:

  • Nikkei 225 - by 0.93% to 29018.33 points;
  • TOPIX (TOPX) - by 0.62% to 1963.57 points.

On June 18th, the situation was no better: Nikkei 225 dropped by 0.19% to 28965.08 points and TOPIX - by 0.87% to 1946.56 points. The shares of tech and pharma companies lost more than others.

Summing up

The report of the US Fed on its plans for credit and monetary policy made markets slump. Most of the US, European, and Japanese indices have been falling for two days in a row. On June 17th, even the August futures for gold (ZGQ1) dropped by 4.65% to $1774.8.

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