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US market momentum shifts as investors await Fed’s next move

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May 1, 2024

US Federal Reserve’s announcements cause investors to wait cautiously as the central bank prepares for its two-day normal policy meeting.

The US Federal Reserve’s crucial announcements on Wednesday caused investors to hold their breath while the financial landscape underwent a subtle shift. The markets continued to wait cautiously as the central bank prepared to wrap up its two-day normal policy meeting.

Although there are no significant changes in borrowing costs anticipated, investors are expecting Fed Chair Jerome Powell’s upcoming remarks.

Powell sent a mixed message, according to Collin Martin, the wise director of fixed income strategy at the Schwab Center for Financial Research. Martin surmised that Powell would highlight the Fed’s determination to take a moderate approach in response to levels of persistently high inflation, as seen by the “dot plot” of rate expectations provided in March by Fed officials.

Doubts about the likelihood of impending rate reduction were intensified by Tuesday’s market collapse, which was brought on by depressing US wage data.

A report on hiring in the private sector surpassing expectations released on Wednesday morning provided more information. These events highlighted the Fed’s continuous dilemma in trying to strike a balance between inflation control and economic growth.

A mixed picture emerged from New York’s midday trading: the Dow saw minor increases, while the tech-heavy Nasdaq and the larger S&P 500 saw slight dips. Powell’s possible message was analyzed by Briefing.com analyst Patrick O’Hare, who recommended a cautious approach that emphasizes the need for more information before considering policy changes.

The perceptive analyst at Capital.com, Kyle Rodda, issued a warning of probable market chaos should the Fed imply a protracted period of unchanged rates or, worse still, consider the possibility of more rate rises.

The only significant European market operating during the May Day shutdown, London’s FTSE 100, finished slightly lower on the other side of the water. Despite a 23 percent fall in quarterly profits, pharmaceutical GlaxoSmithKline’s shares enjoyed a 1.6 percent gain on progress reports on potential new treatments, making it noteworthy amidst the market turmoil.

A measure of mood throughout the world, the dollar, held steady as investors struggled with uncertainty. Regarding the possible effects of a hawkish Fed posture, Trade Nation analyst David Morrison hypothesized that any optimistic signals might strengthen the dollar even more, so putting Japan’s determination to maintain the yen to the test.

In the meantime, oil prices fell in the commodities market, which was explained by a reduction in Middle East tensions when US envoy Antony Blinken made diplomatic overtures to Hamas. The market leader in cryptocurrencies, Bitcoin, saw a six percent decline ahead of the Federal Reserve’s rate announcement. This was made worse by Hong Kong’s lackluster reception of new financial products that track digital currencies.

Source: AFP

Last Updated:  Jun 3, 2024 4:54 PM