Fed Holds Rates Steady but Expects More Increases
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Federal Reserve officials agreed to hold interest rates steady after 10 consecutive increases but signaled they were prepared to raise rates next month if the economy and inflation don't cool more. New economic projections, released Wednesday after their two-day policy meeting, strongly suggested officials were leaning toward slowing down their increases rather than stopping them altogether. Most of them penciled in two more rate increases this year, which would lift them to a 22-year high and boosted their expectations for growth and inflation. "They really needed to hammer home the message that this was not the end, which they did," said Diane Swonk, chief economist at KPMG. In its post meeting statement, the Fed implied the decision to maintain the benchmark federal-funds rate in a range between 5% and 5.25% might be short-lived.
The Swiss stock market ended weak on Wednesday, bucking the positive trend seen across Europe. Several markets in Europe closed on a firm note today, reacting to some positive economic data from the region, and on hopes the Federal Reserve will pause its interest rate increases. The benchmark SMI, which advanced to 11,356.35 around mid morning, ended the day's session with a loss of 48.97 points or 0.43% at 11,278.30. Logitech tanked 12.5% after Citi downgraded the stock's rating to neutral from buy following an announcement from the company that its President and CEO Bracken Darrell is departing. Roche Holding declined 2.05% and Sonova ended 1.29% down. Givaudan, Richemont, Geberit and Novartis ended lower by 0.3 to 0.7%. Kuehne & Nagel climbed 1.33%. Holcim, Swiss Life Holding and Swisscom gained 0.9 to 1%. Sika and Lonza Group ended higher by 0.78% and 0.67%, respectively. In the Mid Price Index, Lindt & Spruengli, Adecco and Temenos Group drifted down 2 to 2.25%. Galenica Sante and Dufry both ended lower by about 1.3%. Ems Chemie Holding, Barry Callebaut, AMS, SGS and Bachem Holding lost 0.68 to 1%.
European stocks closed higher on Wednesday thanks to encouraging data from Germany and the U.K., and on hopes the Federal Reserve will pause its interest rate hikes after data showed a moderation in U.S. consumer price inflation in the month of May. The pan European Stoxx 600 climbed 0.36%. The U.K.'s FTSE 100 edged up 0.1%, Germany's DAX gained 0.49% and France's CAC 40 surged 0.52%, while Switzerland's SMI drifted down 0.43%. Among other markets in Europe, Austria, Belgium, Czech Republic, Denmark, Finland, Greece, Ireland, Netherlands, Poland, Russia and Spain closed higher. Portugal edged up marginally. Norway, Sweden and Turkiye ended weak, while Iceland settled flat. In the UK market, Smith & Nephew rallied more than 5%. Anglo American Plc, Antofagasta, CRH, Rio Tinto and Glencore gained 2.25 to 4%. Admiral Group, Prudential, Smurfit Kappa Group, Ocado Group, B&M European Value Retail, Mondi, Standard Chartered, Ashtead Group and Fresnillo advanced 1 to 2%. Entain tanked nearly 9%. BT Group, Hargreaves Lansdown, AstraZeneca, RS Group and Reckitt Benckiser lost 1 to 2.7%. In the German market, Zalando climbed more than 4% and Vonovia surged 3.6%. Symrise, Daimler Truck Holding, Fresenius Medical Care, Continental, Deutsche Post, Mercedes-Benz, Deutsche Telekom, Adidas, Bayer and Infineon gained 1 to 2.2%. MTU Aero Engines fell 1.7%. Henkel drifted down 1.3%, while Porsche ended nearly 1% down. In Paris, Renault rallied nearly 4%. Teleperformance surged 2.2% and Vinci gained nearly 2%. Kering, Carrefour, BNP Paribas, L'Oreal, ArcelorMittal, Stellantis, Capgemini, Vivendi, Eurofins Scientific and STMicroElectronics also ended notably higher.
Stocks and bonds finished close to flat on Wednesday after the Federal Reserve opted not to lift interest rates but emphasized that further increases likely lie ahead later this summer. The decision to skip a rate hike was widely expected heading into this week's policy meeting, but a forecast for more rate increases in the near future caught some investors off guard. The sideways trading paused a broadening rally for major indexes that has been fueled by hopes interest rates could peak without triggering a major economic downturn. The S&P 500 spent the morning in the green, but gyrated after the Fed's 2 p.m. announcement. The central bank held rates steady at between 5% and 5.25%, but signaled that it expects its target to rise to about 5.6% by the end of 2023. In March, the Fed had projected a 5.1% year-end rate, and many traders had hoped that interest rates were already peaking. The major indexes then pared their losses as Fed Chair Jerome Powell said in a press conference that central bankers believe inflation is in the process of moderating. The S&P rose by less than a tenth of a percentage point and the tech-heavy Nasdaq Composite climbed 0.4%. The Dow Jones Industrial Average fell 232.79 points, or 0.7%, to 33979.33, though it was dragged down by a decline in UnitedHealth Group stock. Tesla Inc. raised U.S. prices for its Model Y crossover by $250 on Tuesday. The starting price for a Model Y is now $47,740, according to Tesla’s website. Prices for the “long-range” and “performance” versions remained the same. After cutting prices on its vehicles earlier this year to boost sales, Tesla has been tweaking prices higher where it can.
The stock markets in East Asia and Australia are mostly up on Thursday. The stock markets in Tokyo and Hong Kong are up somewhat more than the other trading centres, while the stock market in Seoul is slightly in the red. The focus is on economic data and the central banks' interest rate policy. Meanwhile, the Chinese central bank cut the medium-term lending facility (MLF) to 2.65 per cent from 2.75 per cent.
Short-term U.S. Treasury bonds, strongly influenced by Fed policy expectations, held steady. The 2-year Treasury yield ended at 4.707%, up a hair from 4.694% on Tuesday.
Bank of America raises Vinci to EUR 125 (120) – Buy
UBS raises Wizz Air to Buy (Neutral) – GBP 43 (34)
Deutsche Bank Bank lowers Ströer to EUR 53 (58) – Hold
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