The prospect of further rising interest rates and cautious outlooks from two corporate heavyweights caused price losses on Wall Street after the extended weekend due to the holiday. At the same time, the yield on ten-year US government bonds approached the 4% mark. Investors are eagerly awaiting the publication of the minutes of the US Federal Reserve's latest interest rate decision (FOMC Minutes) this evening. Meanwhile, New Zealand's central bank tightened its key interest rate to the highest level since 2009.
The Dow Jones Industrial closed 2.06% lower than last Friday at 33,129.59 points, just above the day's low. The S&P 500 ended the day 1.66% lower at 3,997.34 points and the Nasdaq technology index closed around 2.4% lower. In addition to latent interest rate concerns, disappointing outlooks from the world's largest retailer Walmart and Home Depot also weighed on investor sentiment.
The Asia-Pacific markets also fell on Wednesday following the losses on Wall Street. In Tokyo, the Nikkei 225 fell by 1.3% and in South Korea the Kospi lost around 1.7%. The Hang Seng Index in Hong Kong slipped 0.3%, while the Hang Seng Tech Index lost around 1%. In mainland China, the Shanghai and Shenzhen indices fell by around 0.6%. In New Zealand, the Reserve Bank raised its key interest rate again by 50 basis points to 4.75%, the highest level in more than 14 years, in the fight against inflation.
In the US, economic activity unexpectedly rebounded in February, with the S&P Global private sector Purchasing Managers' Index (PMI Composite) reaching 50.2 points (January 46.8, consensus 47.5), its highest level in eight months. Previously, the PMI had been below the 50-point growth threshold for seven consecutive months. The services sector in particular fared better, while the business environment in the industrial sector remained weak. According to S&P Global Chief Economist Chris Williamson, there are signs that inflation has peaked, and recession risks are fading.
Business sentiment in the Eurozone also continued to brighten in February, according to S&P Global. The Purchasing Managers' Index for the private sector rose more than expected by two points compared to the previous month and now stands at 52.3 points. Analysts had expected a smaller increase to 50.7 points. The business situation in the service sector improved, while sentiment in the industrial sector dampened slightly.
Companies in the United Kingdom were also more optimistic in February. The Purchasing Managers' Index rose by 4.5 to 53.0 points and thus reached its highest level in eight months. As in the euro area, it was the service sector that expressed more confidence. The survey results showed encouraging resilience in the face of significant headwinds such as rising interest rates, high cost of living, labour shortages and numerous strikes, commented S&P Chief Economist Chris Williamson.
According to the US National Association of Realtors (NAR), home sales have probably bottomed out. In January, however, the number of existing home sales continued to decline for the time being. Compared to the previous month, sales fell by 0.7%, the twelfth month in a row. Over the year, almost 37% fewer existing homes were sold. The real estate market is being burdened above all by higher mortgage interest rates.
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