Currency Note

Global stocks down ahead of Fed interest rate decision

By Roseanne Bradley May 3rd, 2023

Global stocks struggled yesterday as a flurry of US data came in

Major shares across the globe were mostly in the red yesterday as economists digested a flurry of US economic data and as the Federal Reserve (Fed) kicked off its two-day policy meeting.

On Tuesday, data revealed US job openings fell to 9.6 million in March – the lowest level since April 2021. This was considerably below the market’s expectations of 9.775 million.

We also heard that Eurozone inflation increased slightly to 7% in April, as did Italian inflation which came in above market expectations at 8.3% for April.

UK bank HSBC ruled out banking crisis as its profits tripled in the first three months of this year following its rescue of Silicon Valley Bank UK.

Amid waves of business closures and layoffs, global news publisher, Vice, whose assets include Vice News and Refinery29, has been involved in talks with multiple companies in attempt to avoid filing for bankruptcy. The company has been seeking a sale at a price tag of around €1.5 bn.

This morning, market watchers will receive the latest unemployment rate for the Euro Area, which is expected to remain unchanged this month at 6.6%.

This afternoon is to be dominated by potentially market-moving US data. The ISM Services PMI is expected to fall for the third consecutive month to 51.2, from 51.5 in March.

The Fed’s interest rate decision is due at 7pm (UK time) and economists expect the rate to rise by 25 basis points to 5.25%.

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GBP: UK house prices rise to 6-month high

Following yesterday’s Nationwide housing index data which revealed a 2.7% annual fall, there were tentative signs of a recovery as prices rose 0.5% in April. The average house price rose to £260,441, from £257,122 in March.  This monthly increase follows seven months of declines and leaves prices 4% below their August 2022 peak.

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EUR: Eurozone inflation increased to 7%

Yesterday the consumer price inflation rate for the Euro zone increased slightly to 7.0% in April, from 6.9% in March (a 13-month low). Tomorrow, the European Central Bank’s policymakers will reveal the latest interest rate decision. Markets expect a rise of 25 basis points which would take the new rate to 3.75%. Many will be watching to see if today’s inflation increase impacts the ECB’s decision.


USD: Wall Street struggles continue

Wall Street stocks struggled for traction yesterday as investors remained cautious ahead of an expected interest rate rise from the Federal Reserve later today. The Dow lost more than 100 points while S&P 500 and Nasdaq 100 declined 0.4 and 0.1% respectively. It will be interesting to see how these shares are impacted should the Fed surprise economists following its two-day policy meeting.

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