Interest rates

Stock markets are stable after interest rate swings hit the Nasdaq and bitcoin


Investors should have some breathing room today from interest rate concerns that briefly left the Nasdaq in “correction” territory yesterday.

The 10% drop since the Nasdaq summit in November comes amid heightened concerns in early 2022 over the US Federal Reserve’s tightening of monetary policy, although the index recovered later in the session. Monday to close in positive territory.

The resilient finish means London is expected to trade higher after an earlier punch for tech stocks exposed to higher interest rates.

Why Matt Molding Is Wrong About Short Sellers

08:18 , Simon English

Town Commentary: There is a long, dastardly history, and quite a fun one for heads of large corporations who complain about short selling.

In 2006, Enron chairman Ken Lay blamed the collapse of the now famous energy trader on bad investors who dared to bet its shares would drop.

In 2008, HBOS said the shorts were undermining the bank by claiming it was going bankrupt. It was and it did. The city watchdog, then the FSA, dropped a brief investigation into allegations that traders illegally profited from the short sale, due to lack of evidence.

read more here

Stock market optimism despite rising rates

07:54 , Graeme evans

UBS Global Wealth Management expects three rate hikes from the US Federal Reserve this year, starting in March.

Further hikes over the next two years are expected to take the rate to between 1.75% and 2% by the end of 2024.

However, UBS chief investment officer Mark Haefele believes there is no reason to believe the equity rally is about to end.

He said today: “Historically, stocks have performed well in the months leading up to the first rate hike in a cycle. Since 1983, the S&P 500 has risen 5.3% on average in the three months before the Fed’s first rate hike.

In addition, the normalization of Fed policy should not dent the prospects for growth in corporate earnings, which are supported by above-trend growth supported by strong consumer spending and still easy access to capital. “

UBS only expects a gradual rise in rates and the 10-year US Treasury yield to drop from the current 1.75% to 2% by June.

Markets remain stable before Powell’s testimony

07:41 , Graeme evans

Investors are hoping for a quieter session after heightened interest rate pressures pushed the Nasdaq down 3% in New York yesterday.

The sell-off came amid speculation the US Federal Reserve could hike rates four times in 2022 from March, compared to previous hopes of two hikes.

The rate outlook put pressure on the valuation of high-growth stocks as the Nasdaq briefly entered corrective territory with a 10% drop from its November high.

Stocks then stabilized after the yield on US 10-year bonds edged down to end a series of seven straight increases, having surpassed the 1.8% level for the first time since January 2020.

This means the Nasdaq ended last night’s session slightly in positive territory, while futures on Wall Street point to a more resilient start later.

The FTSE 100 index is also expected to open 35 more points at 7480.

Michael Hewson, analyst at CMC Markets, said attention will now be focused on the testimony of Federal Reserve Chairman Jerome Powell during his re-appointment hearing with the Senate Banking Committee.

Hewson said: “There is a feeling that the markets could be slightly carried away when it comes to the Fed’s aggressiveness in the coming months.

“We might get a better idea of ​​where we are later today when Powell testifies before US politicians, when he will likely be faced with many questions about the timing and number of possible rate hikes, as the US economy is continuing its recovery process. “

The prospect of tightening monetary policy has had an impact on the cryptocurrency market in recent days, with bitcoin at one point trading below $ 40,000 for the first time since September.