Fed Minutes, Russian Debt, Lagarde – What’s Happening in the Markets By


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By Geoffrey Smith – As the Fed releases the minutes tonight at 20:00 CET, rumors are intensifying of those who see the current economic regime as the prelude to a recession. For this reason, requests for aggressive interest rate hikes are decreasing in Europe, which could also have important repercussions on the real estate market. In Russia, meanwhile, the central bank faces a halt to the debt license that allowed Moscow to meet previous commitments, while the ruble continues its strong appreciation against the dollar. Here is the main news on the markets this Wednesday:

1. Burry remembers 2008

The Federal Reserve will publish at 20:00 CEST the last monetary meeting in which the bank raised interest rates by 50 basis points for the first time since 2001. The minutes, however, risk being dated compared to the situation. current, as the meeting on 3/4 May took place at a time when the markets were focused more on inflation risks than on recession prospects.

In fact, they are the latest that are occupying the minds of investors, after the prompt warnings of several companies and the weak numbers on the sales of new homes have pushed down bond yields and so-called growth stocks. We recall that already in the first quarter US GDP decreased at an annualized rate of -1.4%.

Memories of the Great Recession of 2007/8 were recalled on Tuesday by a somewhat cryptic tweet from Michael Burry, an investor who became famous for his short subprime trade that helped uncover. like witnessing a plane crash. It hurts, it’s not funny and I’m not smiling, ”Burry tweeted, without specifying what it was.

2. Fewer hawks in the ECB

The exchange is trading in the 1.07 area on the dollar after the strong gains of the past few days following the post on the ECB website in which President Lagarde specified that the era of negative rates will end by the end of the third quarter. In an interview with Bloomberg, the former IMF then reiterated the concept of “gradualness” and “flexibility” in the normalization of the cost of loans, reducing the rumors that they wanted a 50 basis point increase in the summer meetings.

Dutch central bank governor Klaas Knot and Finnish counterpart Olli Rehn, a key ‘centrist’ on the board of directors, said they would both be pleased with a just 25 basis point hike during the bank in July, with Rehn reporting “major downward revisions” in the growth forecast for 2022 that will be announced at the conclusion of the June meeting.

In the Financial Stability Review, Frankfurt wrote that the currently “overpriced” eurozone housing market could “collapse” if mortgage rates rise “faster than inflation, exposing debt-fueled bubbles in some countries. “.

Meanwhile, Germany avoided the recession, considered a take after two consecutive quarters of GDP decline.

3. Stop licensing on debt

In Russia, pressures on Russian debt and international creditors are increasing. After the rumors of last week, the US Treasury has not renewed the extension of the waiver that allowed the Kremlin to respect previous bond commitments.

On March 2, shortly after the invasion of Ucriana, the Office of Foreign Assets Control of the US Treasury Department issued a temporary license, called 9A, to allow the “receipt of interest, dividends or payments at maturity in relation to to debts or shares “between Washington and Moscow despite Western sanctions.

The waiver, which expires today, May 25, has allowed the Kremlin to continue paying investors and avoid defaulting on government debt, allowing US investors to receive regular coupon payments.

Meanwhile, the Russian central bank has announced that it will hold an extraordinary meeting tomorrow to consider the level of interest rates and possibly reduce it to 10.5% during the year, after the sharp increase decided following the invasion of Ukraine. to support the ruble. A currency that reached its highest since the end of 2017 against the dollar thanks to current account data which showed a record in energy exports and a sharp decrease in imports.

4. Contrasted bags

At the time of writing, i is down 0.4%, while {{8839 | Futures 500}} and is down 0.4% and 0.6% respectively. Among the stocks, beware of the chipmaker NVIDIA (NASDAQ 🙂 who will release the quarterly report after the close of the markets.

Equities mixed in Europe, where the advanced 0.1%, while and CAC lost 0.1% and 0.2%.

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