The upcoming decision by the US central bank (Fed) will provide clarity on Wednesday evening regarding the Fed's monetary policy stance and economic assessment. After the European Central Bank (ECB), for its part, once again tightened the interest rate screw, the ECB Vice President hinted that for the time being, the end of interest rate hikes may have been reached. On Wall Street, share prices fell in the run-up to the Fed's interest rate decision, and stock markets in Asia also opened the new week weaker.
In its latest economic report, the so-called Beige Book, the Federal Reserve referred to subdued economic and employment growth in July and August. At the same time, however, inflationary pressures had also slowed. At the annual central bank conference in Jackson Hole, Fed Chairman Jerome Powell kept the door open for further rate hikes and emphasized that the Fed would keep key rates high until inflation was on a sustainable path toward the inflation target. Therefore, the next interest rate decision of the Federal Reserve on Wednesday (8:00 p.m.) is expected with the highest excitement.
Stock markets in the Asia-Pacific region fell on Monday ahead of the important interest rate decisions. In addition to the Fed, the Bank of Japan and the People's Bank of China will also announce their monetary policy decisions on Friday. Hong Kong's Hang Seng Index slipped 1.2% today, leading losses in Asia, while losses on mainland Chinese bourses remained more moderate. South Korea's Kospi also slipped 0.7%. In Tokyo, markets remained closed for a public holiday. In Australia, the S&P/ASX 200 started the week with a minus of 0.75%.
On the New York Stock Exchange, the stock indices posted losses at the end of last week. The Dow Jones Industrial closed at 34,618.24 points 0.83% lower than the previous day and thus still recorded a minimal gain of just 0.1% over the week. The S&P 500 fell by 1.22% to 4,450.32 points and on the Nasdaq indices fell on Friday by about 1.7%. At the same time, the yield on ten-year US government bonds rose to 4.34% and remains near the multi-year high reached in August.
Latest economic data from the US, meanwhile, were mixed. On the one hand, the Empire State industrial indicator for the economic region around New York improved significantly in September from minus 19.0 to plus 1.9 points (consensus -10.0). A reading above zero signals a pickup in economic activity. Industrial production at the national level also increased noticeably in August. Compared with the previous month, output increased by 0.4% (consensus +0.1%). On the other hand, consumer sentiment in the US clouded over in September, according to the University of Michigan. The consumer confidence barometer fell from 69.5 to 67.7 points, while analysts had expected 69.0 points.
On Europe's stock exchanges, statements in the wake of the ECB's interest rate decision provided for a friendly mood at the end of last week. After the European Central Bank (ECB) tightened its key interest rate by another quarter of a percentage point to 4.5% last Thursday, ECB Vice President Luis de Guindos said in an interview on Friday that the ECB may indeed have now reached the end of interest rate hikes for the time being. ECB President Christine Lagarde had emphasized after the last interest rate decision, however, that she could not say even after the tenth rate hike whether the interest rate peak had been reached. However, the focus is now on the question of how long key interest rates should remain at the current level.
Corporate news in focus: Société Générale Capital Markets Day.
Economic data in focus: USA NAHB Housing Market Index September (04:00 p.m.).
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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.