As expected by most, the Swiss National Bank (SNB) has tightened interest rates by another quarter of a percentage point, thus continuing its fight against inflation. The British and Norwegian central banks went one step further, raising their key interest rates by 50 basis points each. While the Federal Reserve (Fed) took a pause in its monetary policy for the time being, Fed Chairman Powell had confirmed a continued restrictive stance in his recent statement. On the stock markets, the interest rate hikes and the prospect of an even longer restrictive monetary policy caused losses, while yields rose on the bond market.
On Wall Street, technology stocks on the Nasdaq, which had previously come under pressure, were able to regain ground. The Nasdaq 100 gained 1.18% on Thursday, closing at 15'042.32 points. Meanwhile, the Dow Jones Industrial remained virtually unchanged at 33'946.71 points. The market-wide S&P 500 ended the trading day up 0.37% at 4'381.89 points. In addition to further interest rate hikes in Europe, statements by Federal Reserve Chairman Jerome Powell on Wednesday also reverberated. Powell had stressed that key interest rates could rise further by the end of the year to bring inflation down to the 2% target. In the bond market, US government bonds came under pressure and the yield on ten-year Treasuries climbed to 3.8%.
Most Asia-Pacific markets fell on Friday. In Tokyo, the Nikkei 225 fell almost 2% and in Hong Kong, the Hang Seng Index also lost nearly 2%. Markets in mainland China are closed on Friday for a holiday. South Korea's Kospi fell 0.9%. Meanwhile, in Japan, the core inflation rate fell to 3.2% year-on-year in May from 3.4% in April. Economists had expected a sharper decline to 3.1%.
After the ECB had already further tightened its monetary policy screw last week, the focus yesterday was on further interest rate hikes. The Swiss National Bank (SNB) stepped up its fight against what it sees as persistent inflation by raising its key rate by 25 basis points to 1.75% for the fifth time. Even though the inflation rate in Switzerland has weakened noticeably this year and is well below the level in the eurozone, the SNB did not rule out further rate hikes.
The Bank of England surprised with a stronger-than-anticipated rate hike of 50 basis points. Most analysts had expected 25 basis points. At 5.0%, the key interest rate now reached its highest level since the financial crisis of 2008.
Norway's central bank also continued its fight against high inflation with a significant rate hike. With an interest rate increase of 50 basis points to 3.75%, the Norges Bank tightened monetary policy more than expected. Like the ECB and the SNB, the Norwegian central bank also held out the prospect of further interest rate tightening.
However, the rate hikes in Switzerland, the UK and Norway appear moderate compared to the tightening in Turkey. The Turkish central bank raised its key interest rate by 650 basis points to 15.0%. However, the rate hike was even less than analysts had forecast, as the inflation rate in Turkey is close to 40%.
Corporate news in focus: In the UK AB Foods Q3 sales and in Austria ams-Osram AGM.
Economic data in focus: UK retail sales May (08:00 CET), Spain GDP Q1 (09:00), purchasing managers indices private sector France (09:15), Germany (09:30), Eurozone (10:00), UK (10:30) and the US (15:45).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.