Markets Update Wednesday 15/12/2021 – Relief

Frankfurt – 15/12/2021


As expected, the US Federal Reserve has prepared the ground for the first interest rate hikes in the New Year. The move came as no surprise to the stock market. Prices rose across the board.

Investors had hoped to see the Fed’s aggressive side but liked that the Fed is finally taking action against inflation, which is out of control. 

For the stock markets, the most important thing is to have maximum planning certainty regarding the Fed’s monetary policy. And this planning certainty is significantly greater after this Wednesday’s interest rate decision.

Specifically, the Fed is accelerating the scaling back of its bond purchases in light of high inflation and expects up to three increases in key interest rates in the coming year. The Federal Reserve has now confirmed that it will cut back its bond purchases by $30 billion a month, twice as much as before, to support the economy in the Corona pandemic.

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This manoeuvre, known as “tapering”, would then be completed in March at the same pace, paving the way for a rate hike. For the time being, key interest rates will remain between zero and 0.25 per cent.

US Markets at a glance

The US stock markets rose significantly after the Fed decision. The Dow Jones initially started trading marginally 0.01 per cent higher at 35,549.35 points. After the Federal Reserve’s decision, the benchmark index turned positive and closed 1.08 per cent higher at 35,926.77 points. Meanwhile, the tech index NASDAQ Composite posted significant losses at the start but eventually closed 2.15 per cent higher at 15,565.58 points. The market-wide S&P 500 index rose 1.63 per cent to 4,709 points, missing its previous record high by just one point at the day’s high of 4,712 points.

The Federal Reserve has decided on a faster exit from its massive purchasing programme because of the high inflation. In addition, new projections now hold out the prospect of at least three interest rate hikes next year. The reduction in bond purchases will be doubled to 30 billion dollars per month, the US Federal Reserve announced. This would phase out the purchases by March 2022.

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Far East Markets at a glance

There was no uniform direction on the Asian markets. In Japan, the Nikkei ultimately gained a slight 0.1 per cent to 28,459.72 points. Meanwhile, the Shanghai Composite in mainland China lost 0.38 per cent to 3,647.63 units, while the Hang Seng in Hong Kong was 0.91 per cent lower at 23,420.76 points.

On Wednesday, all eyes were eagerly focused on the US Federal Reserve Bank, which held a key meeting and announced its interest rate decision in the evening. 

European Markets at a glance

The European stock markets were finally friendly in the middle of the week. The EuroSTOXX 50 opened the trading day with a marginal plus and was able to expand its gains slightly intraday. In the end, it was up 0.37 per cent at 4,159.68 index units.

The DAX closed slightly higher at midweek. At the end of a trading day with little fluctuation, the leading German index advanced by a moderate 0.15 per cent to 15,476 points. The TecDAX showed little movement at the start of trading. In the day, it rallied strongly and ended the session 1.29 per cent higher at 3,836.47 points.

Investors were eagerly awaiting the decisions of the US Federal Reserve on Wednesday. Investor caution was nothing unusual before the Fed meeting. Although a tightening of the current bond repurchase programme (“tapering”) was a foregone conclusion on the market, the indications of the central bank’s further course of action were of particular importance.

Forex, gold, oil and crypto

The prospect of a tighter monetary policy in the US initially boosted the dollar on the forex market. For a euro, only 1.1240 dollars had to be paid in the meantime, but then the common currency recovered to 1.1294 dollars. 

Fears of weakening demand are weighing on the oil price. The International Energy Agency has warned that an increase in infection figures with the coronavirus could dampen global oil demand, while at the same time, crude oil production is increasing, especially in the USA. 

The gold price recovered sharply after the Fed’s announcement, closing the day at $1,779 per troy ounce. 

Similarly, the cryptocurrency market turned bullish in late trading, sending Bitcoin up 1 per cent to $48,800, Ethereum 4 per cent to $4,020 and Solana even 10.2 per cent to $178. Binance Coin gained 2.4 per cent to $540, while Cardano (ADA) rose 3.7 per cent to $1.31, and XRP added 2 per cent to $0.83. 

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Corporate and world economic news

Economic data

US retailers only achieved a meagre increase in sales in November, a month that is so important for the Christmas business. Revenues increased by 0.3 per cent compared to the previous month, as the Department of Commerce announced today. Economists had predicted an increase of 0.8 per cent. In October, there had been a revised plus of 1.8 (previously: 1.7) per cent. It seems many Americans started their Christmas shopping earlier than usual this year – also concerned that some items might be out of stock later due to supply bottlenecks.

The problems in the real estate sector and recurring corona outbreaks have weighed more heavily than expected on important sectors of the Chinese economy in November. Retail sales rose by only 3.9 per cent compared to the previous year, the government announced in Beijing on Wednesday. In October, retail sales had increased by 4.9 per cent. Experts had expected a slowdown, but on average, had anticipated a plus of 4.7 per cent.

US import prices rose slightly more than expected in November. According to the Department of Labour, they increased by 0.7 per cent compared to the previous month. Economists surveyed by Dow Jones Newswires had forecast an increase of 0.6 per cent. Import prices are a determinant of producer and consumer prices. Export prices rose by 1.0 per cent. For the year, a rise of 18.2 per cent was recorded.

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