Fed and ECB raise rates by a quarter percent – BoE expected to do the same on Thursday

Fed and ECB raise rates by a quarter percent – BoE expected to do the same on Thursday

Weekly market summary – w/e 5th May  


US stocks bounced back strongly on Friday to recover the majority of the decline earlier in the week. The week started on a down note with bank concerns continuing to weigh. US regulators had stepped in on Monday to seize First Republic Bank, later announcing that JP Morgan Chase had taken over the failed bank.

On Wednesday, the Federal Reserve announced a further 0.25% rate hike in line with market expectations. A possible pause in the tightening cycle was also signalled by the removal from the central bank’s statement, of the phrase “additional policy firming may be appropriate” – this had previously been included. However, the market didn’t like Chairman Jerome Powell comments that the inflation outlook did not yet support rate cuts, suggesting this may be further away than previously anticipated.

The US jobs report on Friday helped alleviate some of the negative sentiment. Stocks rallied back on nonfarm payroll data for April which showed the number of jobs added was well above forecasts. Apple’s better-than-expected quarterly results also helped risk assets higher at the end of the week.

The European Central Bank also hiked rates by 0.25% on Thursday, indicating a slowing rate of increase; March had seen a 0.50% hike. However, the ECB statement said that pressures on prices “remain strong” and the outlook for inflation “continues to be too high for too long”. Christine Lagarde, ECB president, stated “we are not pausing, that is extremely clear.”

This week, investors will be focusing on key US inflation data on Wednesday and the Bank of England’s meeting on Thursday with market expecting the BoE to raise rates by 0.25%.

UK Market Chart 5th May 2023

US Market Chart 5th May 2023

US Risk Barometer 5th May 2023

Europe Risk Barometer 5th May 2023

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