U.S. stocks declined on Wednesday as Federal Reserve chair Jerome Powell announced another expected sharp interest rate hike. The Fed Reserve increased its policy rate by 75-basis point to a target range of 3% to 3.25%, while penciling in another possible 125-basis points rate hikes by end of the year.
Investors are closely watching policy maker’s projections of monetary policy tightening in the so called “dot plot” of interest rates for the rest of 2022 and the following years, which should give them a glimpse to how high they will go in the future. According to the statement, the central bankers now see a median “terminal” rate of 4.6% in 2023 but don’t see any rate cuts until 2024. Meanwhile, the Fed predicts the economy will grow at a meager 0.2% annual pace this year and a lackluster 1.2% next year. The central bank has swiftly raised borrowing costs from near zero earlier in the year as it strives to combat inflation that is currently 8.3%, near multi-decade highs.
Subsequently, Dow Jones declined 1.7% to finish at 30,183.78, S&P 500 declined 1.7% to finish at 3,789.93 while Nasdaq 100 declined 1.8% to finish at 11,220.19. The 10-year yield Treasury is at 3.543%, while gold spot price increased 1.3% to $1,687.10 per ounce. WTI crude oil fell to near $83 per barrel.
Ukraine continued its counteroffensive against Russia grabbing dozens of tanks left by fleeing Russian troops in the east. By now, Ukrainian forces have regained at least 6,000 square kilometers of territory mostly in the northeast of the country. Vowing to use all means necessary to defend Russia and its invasion of Ukraine, Russian President Putin announced a “partial mobilization” in his televised national address on Wednesday and said that Russia is fighting the full might of the North Atlantic Treaty Organization. Russian stock market recovered on Thursday after an escalation of the war in Ukraine ruffled the market in the previous two days. Having hit a seven-month low on the day before, IMOEX traded 2.73% higher this morning to 2,190 and RTSI gained 3.44% to 1,145. The best performers were energy giants Gazprom and Lukoil, along with metals producer Norilsk Nickel and internet company Yandex. Polymetal fell as much as 6% after reporting a drop in profits. The sanctioned gold and silver producer canceled its 2021 dividend and refrained from proposing an interim payout. Russian ruble remained almost unaffected by the recent political developments and gained this morning both against US Dollar and Euro. USDRUB was down 0.47% to 60.22 and EURRUB was down 0.89% to 59.26. Although ruble may be subject to some volatility in the current circumstances, the tax period factor remains supportive the Russian currency, some analysts comment. Russian sovereign local bonds yields were slightly down this morning with 10-year benchmark bond yields losing 8 bps to 10.225%. To finance a “partial mobilization” plans Russian government plans to collect more than 3 billion RUB over the next three years by raising taxes on commodity exports. Previously, Russian government approved a decree to allocate half of its $210 billion emergency fund for the purchase of OFZ bonds, a move it has never done in the past.
SSA opens weaker following the FOMC’s hawkish rhetoric accompanying the 75bps hike. A late mini rally retracing Wednesday’s early loss is all but wiped out at the open. ANGOL (-.625) largely offered at the open having outperformed with a 1.50 gain yesterday. GHANA opens with a tilt towards the upside however with the selling post restructuring headlines comparatively muted on Wednesday.