Markets Lower after FOMC Minutes Suggest Further Tightening

Published 2023/08/17, 08:11
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Most global markets traded down on Wednesday after minutes from the recent Federal Open Market Committee (FOMC) meeting signaled that policymakers continued to anticipate strong upside risks to inflation, which could need additional tightening of monetary policy. Some members did, however, raise the risks of raising rates too high. This tone from the FOMC caused Wall Street to close in the red last night.

In response to Beijing abruptly suspending the release of youth unemployment data, which had recently surged to record highs, the Hang Seng declined by 1.36% on Wednesday. The Nikkei dropped 1.46% after losses on Wall Street negatively impacted sentiment.

European markets closed mixed after lower UK inflation and EU unemployment data counteracted higher economic growth and industrial production on the continent. UK inflation “dropped to 6.80% in July 2023 from 7.90% in June, pointing to the lowest level since February 2022 and matching market consensus, mainly due to a slump in fuel prices. Additionally, the core rate, which excludes volatile items such as energy and food, was at 6.90%, unchanged from June's reading but remained outside the Bank of England's 2% target, providing the central bank with room to continue the ongoing policy tightening path,” Trading Economics added. Data also showed that the Eurozone economy grew by 0.30% in the second quarter of 2023 after a flat first quarter, while industrial production rose by 0.50% month-over-month in June 2023. The FTSE 100 and CAC 40 closed down, while the DAX closed up slightly.

The FTSE/JSE All Share Index fell nearly 0.90% on Wednesday amid growing worries about the Chinese economy and the stability of the international financial system. The rand continued to trade weaker against major currencies, trading at R19.16/USD at 00h00 local time.

The price of Brent crude continued its downward trend as ongoing worries about China's economy weighed on demand, while the minutes of the July FOMC meeting revealed that US policymakers were divided over whether to raise interest rates further and might do so for a longer period of time. Gold was also trading down at $1 891 an ounce around the same time.

PSG Wealth Daily Investment Update, 17 August 2023

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