As expected, the fact that the Federal Reserve will raise US interest rates “soon” is bad for stock markets. The US central bank announcement opens European stock markets in the red. Previously, Wall Street and Asian stock markets also closed in negative territory.
The reaction to the ad was clearly noticeable. First, the Federal Reserve issued its interest rate decision, which means maintaining current low interest rates. The most important indicators on the New York Stock Exchange were still positive at the time. However, a subsequent explanation from Fed Chairman Jerome Powell caused a change. Powell said he would raise interest rates “soon,” but remained hesitant about the timing and size of the monetary support.
The Fed wants to address the rapid rise in inflation by raising interest rates. That increase could come as early as the next meeting on March 16th. This appears to be the end of years of ultra-loose monetary policy in the US. The availability of cheap money by the central bank has boosted the stock market over the past year. It is now in danger of disappearing.
After a positive start, the Dow eventually lost 0.4 percent to 34,168.09 points. The Standard & Poor’s 500 Index fell 0.2 percent to 4,349.93 points. The Nasdaq Technology Index closed the session almost unchanged at 13,542.12 points.
Obviously, European stock markets were down when the opening bell rang. In Brussels, Bel20 is down about one per cent. In Frankfurt, Amsterdam and Paris, losses between 1.5 and 2 per cent were on the table in early trading.
The announcement hit the Tokyo Stock Exchange even harder last night. The main index of the Tokyo Stock Exchange eventually lost 3.11 percent, while the broader Topix lost 2.61 percent on Thursday. The Hang Seng Index on the Hong Kong Stock Exchange was down 2.5 percent at noon.
The planned announcement and fears of a Fed rate hike – as well as the geopolitical tensions surrounding Ukraine – were already nervous caused in the financial markets. The result was the stock market’s worst month since the pandemic began, says investment bank Goldman Sachs analysis. For example, the Nasdaq 100 has lost about 15 percent since November.
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