EconomyMarkets fall ahead of Fed decision

Markets fall ahead of Fed decision

The operations of this Tuesday were clouded by the uncertainty about the monetary policy decision of the Federal Reserve (Fed, for its acronym in English), the tone of the statement and the update of the macroeconomic expectations of the central bank for the end of the year .

The market expects the US central bank to raise rates by 75 basis points for the third time in a row and they predict the rate cap will end at 4.5% by March 2023.

The benchmark S&P 500 index has fallen 19% this year as investors fear the Fed’s aggressive moves could tip the US economy into recession. On the day of this Tuesday it stood at 3,858.3 units with an intraday drop of 1.07%. The Dow Jones and Nasdaq indices ended down 1.01 and 0.95%, respectively, closing at 30,706.23 and 11,425.05 points. In the year, each index accumulated falls of 15.5% and 27%.

“Investors’ attention will be focused on the text of the statement and on the press conference by Chairman Jerome Powell. The change in the dot plot that contains the expectations of the members of the Federal Open Market Committee (FOMC) for the interest rate in the medium and long term will also be relevant. , said Gabriela Siller, director of economic analysis at Banco Base.

To this uncertainty, problems in companies are added. The gloomy outlook on FedEx’s fiscal first-quarter earnings dragged its shares down 21% last Friday. This fact was echoed in the automobile manufacturer Ford, whose titles fell 12.64% today, after it indicated a blow of 1,000 million dollars greater than expected due to inflation and delayed the delivery of some vehicles to the quarter quarter, due to the shortage of spare parts.

“US stocks are weakening as Wall Street expects the Federal Reserve to remain aggressive in its fight against inflation and Ford reminds us that supply chain issues remain a concern,” said Edward Moya, senior analyst at OANDA. .

In Mexico, the Price and Quotation Index of the Mexican Stock Exchange (S&P/BMV IPC) closed with a performance contrary to the rest of the market: it advanced 0.59% to a level of 47,068.53 points, while the FTSE BIVA grew 0.77% at settle at 980.99 units.

For cryptocurrencies, the trend did not change, since bitcoin presented a drop of 2.88%, remaining at a price of 18,965.0 dollars. The performance of cryptocurrencies today, and over the course of this year, has been guided by the shift from risky assets to safe-haven assets, such as the dollar, amid rising geopolitical and recessionary risks.

Gold and oil fall on dollar strength

The price of gold fell as much as 1% on Tuesday, weighed down by the strength of the dollar and the high yield of US bonds, with investors squaring positions before an expected large increase in interest rates by the Federal Reserve.

At 2:00 p.m., the metal was trading at $1,664.8 per ounce, down 0.66%, a 29-month low hit last week. Meanwhile, US gold futures closed down 0.4% at $1,671.10.

“Gold can’t shake off any of these concerns of aggressive Fed tightening…yields continue to skyrocket, especially at the short end of the curve, that’s been putting constant pressure on gold,” he said. Moya.

Faced with a strengthening of the dollar, the demand for commodities decreases by making them less accessible to investors who have another currency. Industrial metals were also hit the hardest by concerns over demand, with the global economy feared to slow down or even slide into recession.

Copper decreased 0.01% to $7,826 per metric ton. Meanwhile, aluminum and zinc fell 0.24 and 0.38%, respectively, and closed the session trading at $2,245.5 and $3,128.5 per metric ton.

Oil prices closed the session lower, with WTI trading at $84.45 a barrel, down 1.49%, while Brent contracted 1.27% to $90.83. One of the factors in the decline was the possibility of supply rising, as the US government said on Monday it would release an additional 10 million barrels of oil from its strategic reserves in November. This will be given as a way to support Europe before the Russian oil embargo begins.

With information from Reuters

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