2024-04-17 02:38:31
Middle East unrest – Stock markets fluctuate due to inflation concerns
10-year U.S. Treasury bond yield exceeds 4.6%
UBS: “Interest rates will rise to 6.5% next year”
Following Iran’s airstrike on Israel, Israel also declared “painful retaliation,” and the global financial market is in turmoil, with the ‘Volatility Index’ on Wall Street in the United States soaring. Expectations that the U.S. Federal Reserve will cut interest rates in June are fading, and there are even predictions that interest rates may rise again next year.
On the 16th (local time), the Standard & Poor’s (S&P) 500 Index, the benchmark of the New York Stock Exchange, rose by about 0.8% in the early hours of trading. However, when Israel declared a counterattack in some way, it ended with a 1.2% drop compared to the battlefield. The Nasdaq index, centered on technology stocks, also fell 1.79% compared to the previous day.
The volatility index (VIX) of the Chicago Board Options Exchange (CBOE), known as Wall Street’s ‘fear index’, rose 1.92 points (11.09%) from the previous trading day to 19.23. This is the highest figure in six months since the end of October last year. It is approaching 20, which is generally considered the psychological stability line for investors.
On Wall Street, there is an analysis that although the situation in the Middle East had an impact, stronger-than-expected US inflation indicators changed the market trend. US March retail sales announced on the 16th increased by 0.7% compared to the previous month, well exceeding the market forecast (0.3%). Previously, in February, it increased from 0.6% to 0.9%. It showed that despite the Federal Reserve’s intense tightening, demand in the United States is still hot.
Due to the possibility of prolonged interest rates, the interest rate on 10-year U.S. Treasury bonds exceeded 4.6%. The dollar index, which represents the value of the dollar against six major currencies, also exceeded 106 again, reaching its highest level this year.
With the US’s strong growth coupled with ‘sticky prices’, Wall Street is even predicting that “it will be fortunate if the Federal Reserve cuts interest rates at least once this year.” Swiss global investment bank UBS said in an investment report that day, “We believe the Federal Reserve will cut interest rates twice this year,” but added, “If the U.S. economy continues to grow and the inflation rate remains above 2.5%, the Federal Reserve will resume raising interest rates early next year.” “By mid-year, the Federal Reserve interest rate may reach 6.5% (from the current 5.25-5.5%),” he predicted.
New York = Correspondent Kim Hyun-soo [email protected]
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2024-04-17 02:38:31