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Fed effect on global markets

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The US Federal Reserve (Fed), in its June meeting that ended yesterday, raised the reference rate by 75 basis points, bringing it in the range of 1.50-1.75 percent.

After inflation data announced last week in the US rose to a 41-year high, the Fed’s decision to raise interest rates by 75 basis points was the fastest rate hike since 1994.

The Fed’s inflation forecast for this year rose from 4.3% to 5.2%. The US economy growth forecast for this year has been reduced from 2.8% to 1.7%.

The median expectation for the funding rate increased from 1.9% to 3.4% for 2022, from 2.8% to 3.8% for 2023 and from 2.8% to 3.4% for 2024..

Fed Chairman Jerome Powell, in a statement after the meeting, said the bank could raise interest rates by 50 or 75 basis points at its July meeting against high inflation, saying the 75-point increase interest rate base was unusually large and he did not expect movements of this size to be widespread.

Following Powell’s remarks, which noted that reducing inflation is their priority and acted swiftly to do so, equity markets entered an uptrend with diminishing uncertainties about the future.

THE DOLLAR INDEX IS CLOSE TO THE 20-YEAR SUMMIT

As the dollar declined against other currencies, the dollar index returned from its 20-year peak and stabilized below 105.

ENGLAND HAS ALSO WATCHED THE FED

As central banks continue to falter in their fight against inflation on a global basis, the Bank of England has raised the benchmark rate by 25 basis points to 1.25%.

HARD FALL IN US MARKETS

The New York stock market ended the day with a steep decline due to recession fears increased after the Fed’s interest rate hike. The Dow Jones Index fell more than 700 points and fell 2.42%. at 29,927.07 points, dropping below 30,000 points for the first time since January 2021.

The S&P 500 Index fell 3.25% to 3,666.77 points and the Nasdaq Index fell 4.08% to 10,646.10 points. The S&P 500 Index has fallen nearly 24% from its January peak and the Nasdaq Index has fallen nearly 34% from its November peak, confirming a technically “bear market”.

THE CONCERNS OF WITHDRAWAL INCREASE

The bank’s aggressive rate hike decision against high inflation fueled fears that the US economy would be dragged into recession.

Following the Fed’s interest rate decision, the US 10-year bond yield, which fell from its 11-year high, fell today to 3.23%.

REQUESTS FOR UNEMPLOYMENT REMUNERATION FALL LESS THAN EXPECTED

According to data released today in the US, however, the number of people who applied for unemployment benefits for the first time in the country fell to 229 thousand in the week ending June 11, down less than expected, demonstrating that the the job market is quite tight.

In the United States, however, the Philadelphia Fed Manufacturing Index fell to minus 3.3 in June, signaling a contraction in the manufacturing sector contrary to expectations.

Housing starts in the country fell by 14.4 percent in May to 1 million 549 thousand, while building permits fell by 7 percent to 1 million 695 thousand.

The average interest rate for a 30-year mortgage (home loan) in the United States rose to 5.78%, the highest level since November 2008.

EUROPEAN EXCHANGES CLOSE THE DAY IN FALL

European equity markets ended the day lower as the Fed’s aggressive rate hike raised concerns about a possible recession at a time when global economies are facing high inflation.

The STOXX600 index, which includes the largest European companies, fell 2.47% to 402.88 points.

In the UK, the FTSE 100 index decreased by 3.14% to 7,044.98 points, in Germany the DAX 30 index decreased by 3.31% to 13,038.49 points, in France the CAC 40 index is decreased by 2.39% to 5,886.24 points and in Italy in the FTSE MIB 30 it decreased by 3.32% to 21,726.64 points.

The euro / dollar parity has increased by 0.86% since TSI 19.18 and traded at the level of 1.053.

In Europe, investors focused on rising inflation, the potential for recession and central bank monetary policies.

Total sales in the EU car market fell by more than 10% in May.

Natural gas shipments from Russia to Europe decreased as Nord Stream’s capacity was reduced.

MIXED LOOK ASIAN BAGS

Asian equity markets followed a mixed course following the US Federal Reserve (Fed) decisions yesterday.

With these developments, the Shanghai Composite Index in China decreased by 0.6% to 3,285 points and the Kospi Index in South Korea increased by 0.2% to 2,451 points.

In Japan, the Nikkei 225 index rose 0.4 percent to 26,431 points, while the dollar / yen parity stabilized at 134.3, 0.4 percent above the previous closing level.

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