The US stock market rose sharply on the 28th. U.S. Treasuries also rose. Financial markets calmed down after the Bank of England announced its purchase of government bonds. The dollar/yen exchange rate fell to the low 144 yen level.
Bank of England buys long-term UK bonds – as much as needed to calm markets (3)
The S&P 500 stock index rose 2% from the previous day to 3719.04, rebounding for the first time in seven business days. It was the first rise since the Fed’s decision to raise interest rates at its meeting last week and further strengthened its hawkish stance. The Dow Jones Industrial Average rose $548.75, or 1.9%, to $29,683.74. The Nasdaq Composite Index rose 2.1%.
The S&P 500 even rose 2.5% late in trade, helped by Amazon.com Inc.’s rise. The annual event showed that the company is making progress in entering the wellness and automotive industries.
US Treasuries were also bought, and the 10-year bond yield fell below 3.70% at one point. Prior to the Bank of England’s announcement, it was briefly above 4%. As of 4:33 pm New York time, it was down 21 basis points (bp, 1 bp = 0.01%) to 3.73%.
Atlanta Fed President Raphael Bostic has endorsed a total of 1.25 percentage points of interest rate hikes by the end of the year. He has once again highlighted the Fed’s hawkish stance.
Atlanta Fed president backs rate hike to 4.25-4.5% by year-end
“Inflation and interest rates are everyone’s focus,” said Josh Emanuel, chief investment officer of wealth management at Wilshire. The stance has certainly put the stock market in a period of concern.” “Equities will definitely take cues from the bond market going forward, so any drop in bond yields bodes well for equities,” he said.
Adrian Helfert, CIO of multi-asset strategies at Westwood Holdings Group Inc., said stocks may be rising as the market has priced in the Fed’s hawkish stance. “It’s hard for the U.S. authorities and officials to say more. They haven’t said they’re going to start raising rates by 1 percentage point,” he said. “The market may at least now believe what the U.S. authorities are saying,” he said.
Meanwhile, geopolitical tensions continue to smolder, and Cameron Dawson, CIO of Newedge Wealth, said there is “likely to be met with skepticism” about any gains in the face of these challenges. indicate. He said there was a “double headwind”: a sharp slowdown in the global economy was weighing on corporate earnings and a tightening of liquidity was putting pressure on valuations.
In the foreign exchange market, the dollar has weakened across the board against the 10 major currencies. Against the backdrop of higher stock prices and lower bond yields. The euro turned higher after hitting a 20-year low at one point.
The Bloomberg Dollar Spot Index, which tracks the dollar’s movements against 10 major currencies, fell 1%. It was the sharpest drop since early August. As of 4:33 pm New York time, the dollar fell 0.5% against the yen to 144.13 yen. There was also a scene where it fell below 144 yen at one point. The euro rose 1.5% against the dollar to $0.9736 per euro. The pound rose 1.4% against the dollar to $1.0878.
Rabobank strategist Jane Foley said the dollar will remain “strong” until the Fed is “convinced that US inflation is slowing and inflation expectations are sufficiently stable.” “It’s likely months away,” he said.
Crude oil futures in New York continued to rise, marking the biggest rise since July. Serious concerns over Europe’s energy security and declining US inventories dampened the supply outlook.
New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) futures for November contract closed at $82.15 a barrel, up $3.65 (4.7%) from the previous day. London ICE North Sea Brent November delivery rose $3.05, or 3.5%, to $89.32.
U.S. crude inventories fell last week for the first time in a month, according to data from the U.S. Energy Information Administration (EIA). Especially in the eastern and western coastal regions, fuel stocks have dwindled dangerously. On the other hand, the damage to Nord Stream, the main pipeline that supplies Russian gas to Europe, is widely believed to have been caused by sabotage, raising concerns about an intensifying energy dispute between Russia and Europe.
“The damage to Nord Stream is not just a supply issue, it’s also a political issue in that it’s established that we can’t rely on supplies from Russia,” said Dennis Kistler, senior vice president at BOK Financial Securities. and explained. “An early onset of a harsh winter could push all energy prices to the upside,” he said.
The New York gold market continues to rise sharply. It was in negative territory for a while, but turned upward after the Bank of England resumed bond purchases. Dollar and Treasury yields fell in response to the Bank of England’s announcement, boosting dollar-denominated metals prices.
“The unexpected ‘quantitative easing or yield curve control’ announcement by the Bank of England is aimed at supporting UK gilts, but not with treasuries,” said Tai Wong, senior trader at Heraeus Precious Metals. It also changed sentiment in the dollar market, which triggered gold short covering and buying dips.”