Stock markets continue to digest the Fed’s announcement on Wednesday night the most, although the US Federal Reserve has not tightened and is not expected to reach interest rates next year, but the rise could begin in 2023. This, in turn, was a warning sign of free money-based stock market soaring, it’s no coincidence that prices fell at Wednesday’s close and the S&P 500 index closed at 0.04 per cent and the Dow Jones at 0.62 per cent fell on Thursday, though the Nasdaq Composite, on the other hand, grew by 0.87 percent.
On Friday, European stock markets showed a mixed picture in early morning trading, with the DAX starting the day with a minimal decline, while the Paris Stock Exchange indicator showed a small plus. At the same time, the leading index of the London Stock Exchange weakened by almost half a percent. The index of the Hungarian stock exchange, the BUX, shows a similar weakening, as it was half a percent below its closing value on Thursday at 11 o’clock.
The BUX falls because of Mol
The Hungarian market is primarily driven by Mol, which weakened by one percent, mainly due to lower oil prices. Richter lost half a percent, while OTP and Magyar Telekom showed a 0.1 percent loss.
By the way, oil is not the only one that fell among commodity market products, as the weakening was common on Thursday: metals and precious metals also fell respectively. Experts explained this for two reasons, on the one hand, the dollar strengthened after the Fed meeting, which usually means that the price of dollar-denominated products falls. This was the case now as well, as gold fell by one per cent, but we could see more severe falls as palladium fell by 11 per cent, platinum by 7 per cent and copper by almost 5 per cent. But not only the price of these products, but also corn, for example, went down, the price of one of the most important cereals fell by 6 percent.
Another reason behind the fall in prices was that the Chinese authorities indicated they would release some of their strategic stocks for their own companies. The move was aimed at breaking speculation and rising prices, so far it seems to have succeeded.
A 10 forint weakening against the euro in one week
The Fed’s decision and the subsequent strengthening of the dollar also had an indirect effect on the Hungarian currency. As is the case in such cases, speculators are trying to get rid of the currencies they consider riskier, which is why the cross exchange rate against the euro rose to 355 on Thursday.
In addition, the forint could not appreciate substantially on Friday morning. In connection with the forint, it is also worth noting that the Monetary Council of the MNB will hold its next interest rate decision meeting on Tuesday. A week ago, György Matolcsy made a concrete reference to the expected interest rate increase, so it has been built into expectations ever since. At the same time, many fear that the MNB will eventually take only a symbolic step and that no major interest rate changes will take place.
Fears of an epidemic may intensify
In addition to inflation risks and interest rate decisions, some investors are again worried about the coronavirus. The delta variant of the disease is responsible for 10 percent of new coronavirus cases identified in the United States, up from just 6 percent last week. The dynamic rise shows that it is spreading extremely fast, and may become dominant in the United States within a few months. Experts point out that it can cause other symptoms than the Wuhan wild virus or the alpha variant (formerly British), patients infected with the delta variant mainly produce severe cold symptoms, but are less likely to lose their sense of smell and taste.
New cases continue to rise sharply in the UK, with more than 11,000 new positive cases diagnosed yesterday, the last time we saw such a high number in mid-February. According to the NHS database, the number of patients cared for in hospital is also steadily increasing despite high vaccinations.