MARKETS: China rises after the holidays – JP Morgan Chief Economist: Powell lowers market expectations for lower interest rates

Both falling and rising stock markets were found in Asia on Monday morning. In China, the CSI 300, consisting of the largest companies on the Shanghai and Shenzhen stock exchanges, was up 0.5 percent.

Shanghai’s main index glowed with a green reading of 0.2 percent, and Shenzhen’s main index rose by 1.2 percent.

The stock market was closed in China last week as the country celebrated the transition of the Year of the Tiger to the Year of the Rabbit.

Optimism in China is boosted by hopes for the recovery of the country’s economy after abandoning the zero-coronavirus line. According to the Chinese authorities, travel in China increased by 74 percent during the New Year holidays compared to last year.

However, travel was still half of what it was before the pandemic.

Futures are falling

Hong Kong’s Hang Seng was down 2.4 percent. Tokyo’s Topix was close to yesterday’s closing reading and the Nikkei 225 was up 0.2 percent. Korea’s Busan Kospi, on the other hand, was down 1.4 percent.

The stock market futures showed a bearish opening in both Europe and Wall Street.

The dollar has weakened against several currencies this year. This is likely to be influenced by the fact that the market is pricing in the US central bank, the Fed, to cut interest rates this year.

On Monday morning, there were no major changes in the exchange rate between the euro and the dollar. Around 08:45, the euro fetched 1.0862 dollars, 140.75 Japanese yen, 0.87673 British pounds and 11.219 Swedish kronor.

At the beginning of the year, the euro fetched about 1.07 dollars.

The Fed will meet on Tuesday and Wednesday

This week, the eyes of the market are especially on the Fed meeting, where it will be decided how much interest rates will be raised. Information service Bloomberg’s the median of forecasts collected by economists expects a 0.25 percent rate hike.

In addition, investors are waiting for what kind of comments the Fed will make about its future policy. News agency Reuters according to analysts expect the central bank to signal the continuation of the hawkish line: inflation has not yet been tamed and interest rate hikes must continue

“The head of the Fed (Jerome) Powellin the tone will be hawkish. He will emphasize that the 0.25 percent interest rate increase does not mean the end of interest rate increases”, JP Morganin chief economist Bruce Kasman commented to the news agency.

“We also believe that he will lower the market’s expectations that interest rates would fall this year.”

Here, Powell has plenty of work to do, as futures still predict the Fed’s key rate to rise from a range of 4.25-4.50 percent to a range of 4.75-5.00 percent, but to drop back to baseline by the end of the year.

Kasman believes that there will be another rate hike in March. The chief economist justifies this by the fact that the US labor market is still tight and core inflation is rising.

Regarding the earnings period, the focus is on, for example, Wall Street technology companies, of which, for example, a chip manufacturer will publish their interim reports this week AMDknown as Google Alphabet, Metaformerly known as Facebook, and a transportation and cloud services company Amazon.

By Editor

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