Markets Update Wednesday 22/09/2021 – Nothingburger

Frankfurt – 22/09/2021

Nothingburger

Fed President Jerome Powell’s announcement this evening was not a big bang. As he did three weeks ago at the virtual central bank conference in Jackson Hole, he signalled that the US central bank would probably reduce its bond purchases this year. However, he again did not give a precise timetable and deferred to the next Fed meeting in a month. 

The FOMC discussed the pace of the intended exit, Powell said after the meeting. It would probably be appropriate to end the process in mid-2022, he said. In plain language, this means for the markets that bond purchases will continue until the middle of next year.

As expected, the monetary watchdogs also left the key interest rate in the range of zero to 0.25 per cent on Wednesday. However, the Fed signalled that there could be an increase as early as next year. Until now, a turnaround in interest rates was only envisaged a year later.

Overall, the markets reacted unimpressed to rather positively. 

US Markets at a glance

The news was rather well-received on Wall Street. The Dow Jones opened firmer and then extended its gains. By the end of today’s session, it had risen by one per cent to 34,258.84 points. The NASDAQ Composite also expanded its increase after starting the session on a friendly note. At the closing bell, it was up 1.02 per cent at 14,896.85 points.

In the middle of the week, investors’ attention was focused on the results of the Fed’s meeting. The monthly securities purchases of 120 billion US dollars will be continued for the time being, but the central bank signalled that the purchases could soon be scaled back.

Among the individual stocks, investors focused on the shares of the logistics company FedEx, which lowered its earnings target for the 2021/22 financial year.

Far East Markets at a glance

Also, on Wednesday, the Asian markets did not find a common denominator. 

In Japan, the Nikkei index lost 0.67 per cent to 29,639.40 points. After the holidays, the Shanghai Composite in Mainland China gained 0.40 per cent to 3,628.49 points. The Hang Seng in Hong Kong ultimately rose 0.51 per cent to 24,221.54 units on Tuesday. Trading there was suspended today, Wednesday.

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The focus continued to be on the further threat of insolvency of the real estate group China Evergrande and the results of the meeting of the US Federal Reserve, which, however, will not be announced until the evening European time. Meanwhile, it had a calming effect that a subsidiary of Evergrande confirmed to make interest payments on a bond due in 2025 on Thursday.

European Markets at a glance

The European stock exchanges also moved further into the profit zone. The EuroSTOXX 50 was already trending in the green at the start of trading and increased its gains intraday. By the end of the session, it had gained 1.29 per cent to 4,150.19 index units.

The DAX 40 was also able to extend its initial gains. It was also able to reach the psychologically important mark of 15,500 points and hold it until the end of trading. Finally, it went into the evening with a plus of 1.03 per cent at 15,506.74 points. The TecDAX also started the session with gains and continued to rise but then fell into the loss zone. In the end, it was down 0.29 per cent at 3,896.16 points.

Investors’ focus turned to the US, where the results of the Fed meeting are due in the evening. While details on tapering are expected, the key interest rate is not expected to change for the time being. Another supportive factor was that the Chinese market was quite stable after the holidays.

Forex, gold, oil and crypto

The euro and other important currencies reacted with price losses to the interest rate decisions of the US Federal Reserve on the forex market. The euro had initially climbed to a daily high of 1.1755 US dollars but then came under pressure and fell to the daily low of 1.1685 dollars.

Oil prices rose again today after being under pressure at the beginning of the week. In the afternoon, a barrel of Brent cost 1.35 dollars more than the previous day at 75.70 US dollars. The price of American WTI light oil rose by 1.28 dollars to 71.77 dollars.

The gold price increased sharply after the Fed released their statement but ultimately dropped hard from $1,787 to close at $1,762 per troy ounce.

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Cryptocurrencies recovered from the recent fall, with Bitcoin adding 3.9 per cent to $43,900. Most altcoins fared much better, and many of them posted double-digit gains. Ethereum increased 7.9 per cent to $3,090, Cardano grew 12 per cent to $2.27, XRP was up 11 per cent to $1.01, and Solana gained 14 per cent to $149. The biggest gainers in the top 100 digital assets were LUNA, with a 29 per cent increase to $33.70 and ATOM, increasing 23 per cent to $39.50.

Corporate and world economic news

Economic data

The Ifo Institute for Economic Research has cut its growth forecast for Germany by 0.8 percentage points for 2021 and raised it by 0.8 percentage points for 2022. “The strong recovery after Corona originally expected for the summer is being postponed further,” said Ifo economic research head Timo Wollmersh√§user. According to the calculations of the Munich economists, economic output will increase by only 2.5 per cent this year, but then by 5.1 per cent next year. In 2023, it will only be 1.5 per cent.

Consumer confidence in the eurozone improved in September. The index calculated by the EU Commission rose by 1.3 points to minus 4.0. Economists surveyed by Dow Jones Newswires had forecast a reading of minus 6.0. For the EU-28, the value improved by 1.1 points to minus 5.2. The final index value of consumer confidence for September will be published next week. 

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