News

Published: Feb 18, 2023
Updated: Feb 18, 2023

Global Markets React to Hawkish Fed Remarks and Economic Data

Global markets experienced a downturn as Asian futures fell in response to the hawkish remarks made by Fed officials, indicating the possibility of another 50 bps rate hike. The Dow fell by 1.26%, the S&P 500 dropped by 1.38%, and the Nasdaq slipped by 1.78%, with all 11 sector indexes turning red.

WPI exceeds expectations

In the United States, the Wholesale Price Index (WPI) rose 0.7% MoM in January, exceeding expectations of 0.4%, primarily due to higher energy costs. In contrast, initial jobless claims were reported at 194,000, lower than the expected 2 lakh estimate. On the other hand, the 30-year fixed home loan rate in the US increased to 6.32% from 6.12% last week. Meanwhile, in China, new home prices increased in January.

Fed officials hint at 50 bps rate hike

The possibility of another 50 bps rate hike gained support from two Fed officials. Cleveland Fed President Loretta Mester and St. Louis James Bullard said that they may favour this move. In addition, the European Central Bank (ECB) is almost done with a 50 bps hike in March. However, the Bank of Japan (BoJ) will curtail its ultra loose monetary policy. A survey of 20 top analysts predicts that BoJ will revise the yield curve control tool this year. The government has nominated Kazuo Ueda as the new BOJ governor.

Markets react to this negative cues

Global markets responded to both hawkish Fed remarks and economic data. The rise in WPI and home loan rates in the US and China's new home prices, coupled with the possibility of another 50 bps rate hike, weighed heavily on the markets. Meanwhile, the BoJ will revise its monetary policy, indicating that global markets are likely to face volatility and uncertainty in the near future.