Stocks tumble with gloomy Fed outlook
Fears about the Federal Reserve’s forceful efforts to stop inflation in its tracks with the assistance of other central banks across the world are fuelling the depressing holiday atmosphere. Along with Fed, the Bank of England and the European Central Bank predicted that rates will rise for an extended period of time.
The Fed suggested this week that rate hikes were far from over and even predicted that its benchmark rate would likely increase over 5% in 2023. This is greater than what markets had anticipated just a few weeks prior.
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The policy rate is anticipated to increase to 5.1% next year, the highest level since 2007 according to the Fed. The Fed predicted that GDP growth would weaken and that unemployment would increase.
As concerns about a potential recession threaten to ruin the Santa Claus rally, US markets are tumbling. The Dow Jones Industrial Average was down 461 points, or 1.4%. The S&P 500 was down 1.6% and the NASDAQ Composite was down 1.3%. The indices were on track to see their second consecutive weekly decrease and their first downbeat December in four years.
Dollar cashed in on some gains to serve as a safe space for traders
The central bank fiesta that saw rates raised by the US Federal Reserve (Fed), the Bank of England (BoE), and the European Central Bank (ECB) by 50 basis points each favored the dollar. As greenback is considered the safe haven, most of its rivals suffer. Policymakers also stressed the need of taking the necessary steps to combat inflation, which worries investors.
EUR/USD was not able to close the week in the green. However, it managed to stay above 1.060, which is a loss of 0.25%. GBP/USD stayed flat with a minor loss of 0.02% at 1.217. The aussie copied the sterling and closed a red 0.08%. US dollar also gained against the Canadian dollar by 0.22%.
Oil rally stops at 4% in the green, erasing some of last week’s loss
West Texas Intermediate oil for January delivery in the United States fell $1.82, or 2.4%, to close at $74.29 a barrel on Friday. WTI increased 4% for the week after falling 11% the previous week, like Brent
Brent crude of British origin for February delivery decreased $2.17, or 2.7%, to close at $79.04 a barrel. Despite the 11% decline the previous week that sent a barrel of Brent as low as $75.14, a price not seen since December 23rd 2021, the global oil benchmark was up 4% for the week.
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Putting recession worries aside, there are concerns that China’s coronavirus pandemic might spiral out of control again. Reports of increasing mortality in the top oil importer in the world weighed on oil prices on Friday.
Gold closed the week in the green even after dropping almost 24$ below the magic $1800 mark. The yellow metal picked up some gains and the closing bell announced $1793 which is a 0.9% gain. Usually, silver moves with greater force, however today closed only with a 0.45% gain at $23.407.
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