Stocks Fall as Traders Expect Interest Rate Increase

Global stocks fell on Tuesday; A rally in the previous session was caused by China easing some restrictions on COVID-19; Stopped by concerns about rising central bank interest rates. The Stoxx 600 stock index fell 0.4 percent in early trading. The FTSE 100 was unchanged. Futures trading suggested that Wall Street’s blue-chip S&P 500 index would fall 0.5 percent when it opened in New York, After rising by 1.5 percent on Monday.

Elsewhere, the broader Asia-Pacific FTSE index lost 1.2 percent. The S&P/ASX 200 fell 1.5 percent. This followed a decision by the Reserve Bank of Australia to raise interest rates by half a percentage point, which is the most significant amount in the last 22 years, which has thrown the country’s bond market upside down.

Following the rise in consumer prices around the world, the Governor of the Reserve Bank of Australia on Tuesday raised expectations that inflation would rise further to explain the decision to raise the country’s core lending rate to 0.85 percent. Yields on 10-year Australian bonds rose 0.07 percentage points to 3.55 percent; Because the price of debt has dropped significantly. Yields on two-year bonds, which control monetary policy expectations, rose 0.17 percentage points to 2.76 percent. The global FTSE All-World Index fell nearly 14 percent this year.

Central banks worldwide have cut borrowing costs to combat inflationary trends, which started with coronavirus-related supply chain deficiencies; It was also exacerbated by rising commodity prices caused by the Russian invasion of Ukraine.

Stocks and the Fed

The RBA has taken its step toward deciding on interest rates, which is expected from the European Central Bank on Thursday. U.S. inflation data for Friday should show that consumer prices in the world’s largest economy grew at an annual rate of 8.3 percent in May, the same as last month.

Yields on the 10-year German bank, a benchmark for borrowing costs in the eurozone, fell 0.01 percentage points, up to 1.32 percent, which was about the highest since 2011. Since eurozone inflation hit another record high in May; ECB policymakers have indicated that the bank will increase its key deposit rate; It is currently minus 0.5 percent – at least a quarter of a point in July and then September.

The European economist at Western Asset estimates that there may be significant volatility around the ECB meeting in bond markets this week. The communication challenge of policy strategy is enormous. U.S. Treasury 10-year yield based on loan price and capital valuation worldwide; Was stable at 3.03 percent after rising in the previous session. Traders dial bets on the Federal Reserve raising the interest rate. Brent crude’s benchmark oil price rose 0.3 percent to $119.92 a barrel.

Conclusion

Shares of Chinese tech companies rose this week; Hopefully, Beijing is close to ending the year-long rampage in industry regulators. Alibaba rose 1.9% on Tuesday. JD.com added 3%, and other technology shares rose sharply from Monday. TikTok’s competitor Kuaysho advanced 1.2% on Tuesday. Meituan rose 0.5% on Tuesday; it increased by 10% this week. The gain followed a strong session of Chinese stocks on Wall Street on Monday.

Didi was the most lucrative in New York, jumping 67% since; As The Wall Street Journal reports, Beijing’s cybersecurity review of the travel giant was ending. This move will allow Didi to return to app stores in mainland China, potentially this week.

It is worth noting that China’s economic prospects have deteriorated rapidly in recent months amid widespread closures related to COVID. Consumer costs and factory output fell sharply in April. Unemployment rose to its highest level in early 2020, after the primary coronavirus spread. Concerned about the deteriorating outlook, Beijing has hinted at easing a year-long crackdown on the tech sector.

In recent weeks, government officials have sought to raise the profile of the Internet industry. They also promised to support technology companies trying to enter the list in foreign markets. The government has also released a new package of 33 stimulus measures to keep COVID from growing further; Including tens of billions of dollars in additional tax cuts and infrastructure costs.