- Market sentiment remains sour amid hawkish Fed move, Russia-inspired fears.
- Fed matched market forecasts with 0.75% rate hike but predicts painful path to tame inflation.
- Global leaders condemn Russia over its plans to mobilize troops.
- BOJ, SNA, BOE are some of the key central bankers left to rock the market.
Global traders rush for risk safety early Thursday as the Fed’s hawkish move joins the fresh fears surrounding Russia and China. It should be noted that a slew of central bankers left for announcing their monetary policy moves also keeps the market players on their toes.
While portraying the mood, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years. Furthermore, Wall Street closed in the red and the S&P 500 Futures refresh a two-month low of around 3,770, down 0.70% intraday by the press time.
Recently, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. On the same line were the comments from the Group of Seven (G7) leaders who confirmed cooperation on support for Ukraine.
On Wednesday, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch woes.
It should be noted that Goldman Sachs revised down China’s GDP forecasts amid fresh covid woes, which in turn adds strength to the risk-off mood.
Furthermore, the US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead. While the Fed matched market forecasts, the economic fears surrounding the rate hikes and expectations of another 0.75% increase in November kept the US Dollar on the front foot, despite marking heavy volatility around the announcements.
That said, the US Dollar Index (DXY) renews its 20-year high while commodities are on slippery grounds of late.
Moving on, the central bankers’ actions and the second-tier US data, not to forget the risk catalysts mentioned above, will be important for near-term market directions.