FED raises but is it fast enough?

As expected the FED raised interest rates (by 0.5%) and equity markets seemed to be placated by this as there were some observers calling for a bigger jump in fact the concern was that raises may be 75bps in June however FED’s Powell confirmed the thinking was that 50bps is sufficient but that the FED will also reduce QE by reducing its balance sheet.

Its worthy of note that the last time the FED raised rates this fast (2000-2001) they had a very detrimental, but inadvertent effect on tech stocks and presently that looks like history is repeating.

US 10year went in to the FOMC / FED meeting at a yield of 2.9% and has subsequently rallied to the present 3.14% as the market whilst “cheered” that they didn’t raise more are concerned that the FED may have to. Tuesdays inflation rate data will keep the market from being complacent and is the most important data out this week.

The US$ benefitted ultimately from the rate rise and even though the British raised rates (by 25 bps) GBP was the worst performer against the USD as politics continue to show the ruling Conservatives as weak and the Bank of England said they were concerned about growth going forward; which given the jump in the cost of living, is not that surprising but the fact they verbalised it has spooked the holders of GBP.

Commodities had a very mixed week with metals, in general having a poor week as covid and thereby China lockdowns and economic slowdown continue to feature along with rising rates and the potential knock on effect for world growth.

But energy made new highs in natural gas, and petroleum also made strong gains as the market fretted about the draw on stocks and attempts to stockpile ahead of the Northern Hemisphere summer. Oil further benefitted as the EU drew up plans to stop Russian imports. The news that the Saudi King has been admitted to hospital will also add some concerns.

Date

Country

Figures

Expected

Previous

May 10

GBP

BRC retail sales

 

-0.4%

May 11

USA

Inflation Rate

8.1%

8.5%

 

USA

Oil Stocks

 

1.302M

 

USA

Gasoline Stocks

 

-2.23M

May 12

GBP

GDP YoY

9%

6.6%

 

USA

Initial Jobless Claims

203K

200K

May 13

USA

Consumer Sentiment

64

65.2

DISCLAIMER – Do not rely on information contained in this Market Commentary.


The content of this Market Commentary is provided for general information only. It is not intended to amount to advice on which you should rely. In particular, neither this Market Commentary nor any other content of our website should be construed as investment advice. The information contained in this Market Commentary is not, and should not be read as, an offer, recommendation or inducement to engage in investment activity. In no event shall we be liable for any damages resulting from reliance on or use of any information contained in this Market Commentary. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this Market Commentary. 

Although we make reasonable efforts to ensure that that the information in this Market Commentary is accurate as at the date on which it is published, we make no representations, warranties or guarantees, whether express or implied, that it is accurate, complete or up to date.