Markets Update Monday 13/12/2021 – Central Banks

Frankfurt – 13/12/2021

Central Banks

Investors on Wall Street slowed down significantly after recent gains. The major stock indices fell at the start of the week. Investors were more cautious due to the coronavirus variant Omikron’s continuing uncertainty and the unabated high inflation.

Against this background, the next days will be dominated by monetary policy – including the interest rate decision by the US Fed on Wednesday.

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The decision of the US Federal Reserve is due on Wednesday. The decisions of the Bank of England and the European Central Bank will follow on Thursday.

US Markets at a glance

The US stock markets started significantly weaker this week. The Dow Jones extended its initially only marginal loss in the further course of trading and ended the session 0.89 per cent lower at 35,652.07 points. The NASDAQ Composite tech index also widened its initially small loss and closed 1.39 per cent weaker at 15,413.28 points.

According to traders, a “week of truth” is ahead. The Fed, the European Central Bank, the Bank of England and also the Bank of Japan are meeting in the coming days and will announce their policies are moving forward. Market participants expect the US Federal Reserve to tighten monetary policy more vigorously. This is especially true since the high inflation data last Friday. However, the tightening is largely priced in. “The classic doctrine is interest rates up, equities down. But the reality is, there is so much liquidity and so much demand for yield that ultimately we would need much more aggressive tightening to push equity prices down,” reflected Dow Jones Newswires investment strategist Gregory Perdon of Arbuthnot Latham. He expects equity prices to rise further in the medium term if the Fed tightens monetary policy.

Far East Markets at a glance

In contrast to the weakening Wall Street, the Asian markets mainly posted gains. In Japan, the Nikkei ultimately rose 0.71 per cent to 28,640.49 points. The Shanghai Composite on the Chinese mainland also gained 0.4 per cent to 3,681.08 index points, while the Hang Seng in Hong Kong lost 0.17 per cent to 23,954.58 index points.

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On Monday, the Asian stock exchanges predominantly followed the positive lead of Wall Street. Here, the upswing was due to the November price data, which were in line with expectations. 

European Markets at a glance

On the other hand, the European stock exchanges followed the lead from the USA and slipped into the red. The EuroSTOXX 50 showed green signs shortly after the start of trading and initially maintained them. In the day, however, it slipped into the red and by the end of the session had fallen by 0.38 per cent to 4,183.04 index units.

In Germany, the DAX was also able to make some gains at the start of trading and initially increased its plus. However, in the afternoon, it gave up its gains completely and fell back into the loss zone. At the end of trading, it was marginally 0.01 per cent lower at 15,621.72 points. The TecDAX was also slightly higher shortly after the start of trading and was subsequently able to rise further. However, in the course of the day, it also gave back some of its gains. In the end, it recorded a plus of 0.79 per cent to 3,862.96 points.

This week, investors are focusing on the monetary policy of the US Federal Reserve and the European Central Bank. After the recent very high inflation figures, it is assumed that the Fed, in particular, could close the monetary floodgates more quickly than already announced. The Fed launched plans to gradually phase out its bond-buying programme not long ago. At the upcoming meeting, the central bankers want to accelerate this process. This would allow the Fed to raise interest rates as early as next spring rather than later in the year.

Forex, gold, oil and crypto

Speculation on rising interest rates in the USA is boosting the dollar. In return, the euro lost around 0.2 per cent to 1.1290 dollars in US trading. The Turkish lira was once again in focus on the foreign exchange market. In the afternoon, the currency recovered some of its initial higher losses against the US dollar and the euro after the Turkish central bank interventions. Still, the currency remained under heavy pressure due to the country’s controversial interest rate policy. Earlier, the dollar and the euro had marked record highs against the Turkish currency.

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Oil prices turned negative after initial gains. The leading North Sea grade Brent ($74,43) lost 0.8, the US light oil grade WTI ($71,47) 0.4 per cent per barrel. Last week, the Brent price had risen by more than eight per cent, the most since the end of August. 

The price of a troy ounce of gold rose 0.3 per cent to $1.787, remaining on a bullish course towards $1.810.

Cryptocurrencies remained in the range that had been established a couple of weeks ago and lost significantly today. Bitcoin dropped 7.2 per cent to $46,500, Ethereum fell 8.4 per cent to $3,790, and Binance Coin shed 9 per cent to $520. Solana even plummeted by 10.5 per cent to $155, Cardano lost 9.5 per cent to $1.22, and XRP declined by 7.5 per cent to $0.79.

Corporate and world economic news

Economic data

Price increases in Germany remain exceptionally high. In November, wholesale prices rose by 1.3 per cent compared to the previous month, as reported by the Federal Statistical Office. Compared with last year, the increase was 16.6 per cent. This is the highest rate of increase since the calculation of wholesale price indices began in 1962. In October, the year-on-year increase had been 15.2 per cent, and in September, 13.2 per cent.

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