The fact that the ECB wants to counteract inflation by raising interest rates has raised concerns about economic growth. Wall Street reacted promptly
Concerns about growth have the US stock markets firmly under control again. The most important stock indices significantly increased their previous day’s losses on Thursday.
The most recent decisions and statements by the European Central Bank (ECB) proved to be a drag. The high inflation is causing the central bankers in the euro zone to take countermeasures: the end of the net bond purchases that support the economy has been decided on July 1, and next month there will be a first interest rate hike in eleven years. Another rate hike could follow in September.
The leading index Dow Jones Industrial fell by 1.94 percent to 32,272.79 points. For the market-wide S
According to the ECB, the economic consequences of the war in Ukraine are dampening economic development in the euro area and driving up inflation. Investors on Wall Street drew the conclusion that the US Federal Reserve may also have to step up its pace in order to curb inflation, which is also strong in the United States. Accordingly, nervousness increased before the consumer price data for May due at the end of the week.
The fact that the European Central Bank also sharply raised its inflation forecasts caught investors “on the wrong foot,” commented Thomas Altmann from asset manager QC Partners. “Very few expected such a significant upward adjustment.” This was already putting pressure on prices on Europe’s stock exchanges and, according to Altmann, caused a “sell-off” on the bond markets, where yields rose in return.
In the case of US individual shares, the papers of the Chinese internet trading giant Alibaba fell by more than eight percent after the course fireworks the previous day. Here the hopes of an early IPO for the Alibaba holding Ant Group evaporated as quickly as they had come. This was preceded by reports that the Chinese financial regulators could give up their blocking stance. But it was followed by a denial from China’s stock exchange regulator. The day before, Alibaba shares had gained almost 15 percent on hopes that Beijing’s regulatory stranglehold could loosen.
Shares in other Chinese tech companies listed in New York also suffered from the prospect of continued regulatory pressure and slumped. Among the weakest stocks on the Nasdaq 100, JD.com fell 7.6 percent and Pinduoduo 9.6 percent.
At the top of the index, shares in NXP Semiconductors rose by around four percent. According to an Asian tech blog, the technology group Samsung is planning to take over the Dutch chip manufacturer. Samsung wants to benefit from the strong growth in the market for semiconductors for the automotive industry, it said.
The euro came under pressure despite the ECB’s recent decisions, closing at $1.0616 on Wall Street. In contrast to Wall Street, some market participants on the foreign exchange market have probably speculated on an even faster pace of monetary tightening in the euro area. The European Central Bank (ECB) set the reference rate at 1.0743 (Wednesday: 1.0739) dollars. The dollar thus cost 0.9308 (0.9312) euros.
US government bonds suffered from the sustained rise in interest rates. The futures contract for ten-year Treasuries (T-Note Future) recently lost 0.19 percent to 117.86 points. The yield on ten-year government bonds rose to 3.05 percent.