London, Thursday, 22 September 2022
After the Federal Reserve's most recent policy announcement and following comments from Chair Jerome Powell drove markets into chaos, U.S. stocks ended Thursday's volatile day lower.
The Dow Jones Industrial Average lost 100 points, or 0.4%, while the benchmark S&P 500 dropped by 0.9%. The heavily tech-focused Nasdaq Composite fell 1.4%. The moves prolong a sell-off that the Fed sparked on Wednesday, when the S&P 500, Dow, and Nasdaq all lost about 1.7% and 1.8%, respectively, and represent the third straight day that U.S. equity markets have fallen.
The rate-sensitive 2-year Treasury note hovered close to 4.1%, the highest level since 2007, while the 10-year Treasury note remained close to 3.5%, the highest level since 2011.
For the third time in a row, U.S. central bank authorities increased interest rates on Wednesday by 75 basis points, moving the federal funds rate from its previous range of 2.25% to 2.5% to a new range of 3.0% to 3.25%.
The fed funds rate is predicted to increase to 4.4% by the end of this year and 4.6% by the end of 2023. Policymakers also anticipate raising rates more than before and maintaining that level. This is an increase from 3.4% this year and 3.8% the year before.
Numerous central banks from all over the world Thursday followed the Fed's lead. The National Bank of Switzerland increased its key rate by 75 basis points, and the Bank of England increased its key rate by 50 basis points. Market watchers also anticipate a rate increase from the European Central Bank at its meeting next month.
The Bank of England (BoE) raising interest rates and consumer confidence falling to its lowest levels ever contributed to European equities closing lower on Thursday.
The BoE increased its base rate by 50 basis points, to 2.25% from 1.75%. This was the central bank's sixth straight increase, but it was less than the consensus prediction of 75 basis points.
The STOXX Europe 600 decreased 7.29 points, or 1.79%, to close at 399.76. This index represents almost 90% of the market capitalisation of the 17 countries that make up the European Union.
The FTSE 100 in the UK dropped about 78 points, or 1.08%, to end the session at 7,159. The DAX 30 in Germany dropped 235 points, or 1.84%, to 12,531.
The worst-performing stock of the day was France's CAC 40, which fell 112 points, or 1.87%, to 5,918 at the closing bell.
FTSE MIB in Italy dropped 236 points, or 1.07%, to 21,799. The IBEX 35 in Spain dropped 97 points, or 1.24%, to finish at 7,774.
The consumer confidence indicator dropped to its lowest levels ever in the EU and the euro area, respectively, by 3.5 points and 3.8 points, respectively, according to a flash estimate released earlier by the European Commission.
(Source: Yahoo!Finance // Edited by: Susanne Berger, Finance editor, The Decision Maker)