Major US stock indices began to decline sharply after FOMC minutes

On Wednesday, the US stocks fell sharply after the US Federal Reserve meeting minutes showed that the central bank might raise interest rates earlier than expected. Meanwhile, some Fed officials also warned that the Fed might have to reduce the number of assets on its balance sheet soon after a rate hike. The S&P 500 (US500) and NASDAQ (US100) indices fell sharply after the FOMC minutes were released. The Dow Jones index, which reached a record high at the beginning of the day, also closed lower. By the end of the trading session, the S&P 500 Index (US500) decreased by 1.94%, the Dow Jones Industrial Average (US30) fell by 1.07%, and the Nasdaq Composite Technology Index (US100) lost 3.36%.

The ADP employment report showed that the US private sector added 807,000 jobs (expectation +375,000), but still nearly 4 million below pre-pandemic levels. According to the FOMC minutes, the US labor market is now in a "tight" phase. This week's investor focus is also on US labor market data. The weekly report on new jobless claims will be released on Thursday, and on Friday, the December non-farm data and unemployment rate will be released.

The World Health Organization (WHO) reported Wednesday 2,294,039 new coronavirus cases worldwide in a 24-hour period. This is the highest daily rate in WHO statistics recorded during the pandemic.

European stock indices mostly rose yesterday despite a decline in business activity in the region and a rise in COVID cases. At the end of the day, French index CAC 40 (FR40) gained 0.81%, German DAX (DE30) added 0.74%, British FTSE 100 (UK100) increased by 0.16%. Spanish IBEX 35 (ES35) was the exception and decreased by 0.06%. European auto manufacturers' quotes became the leaders of the growth on Wednesday. Renault SA gained 5.3%, Daimler AG added 4%, and Stellantis NV increased by 3.9%. JPMorgan analysts stick to the recommendation to buy all three companies.

But analysts believe that European stock markets will open with a decline on Thursday, which will continue the global sell-off following the release of the "hawkish" December FOMC protocol.

Kazakhstan has declared a state of emergency across the country. An anti-terrorist operation was launched in Almaty. All the banks in Kazakhstan stopped working. Internet access is also restricted. Middle Eastern air carriers cancel flights to Kazakhstan.

Crude oil reserves showed another decline. In the previous week, inventories decreased by 2.14 Mbbl, but less than the expected -3.3 Mbbl. But gasoline reserves increased by more than 10 Mbbl, the biggest weekly increase since April 2020. This indicates that the population does not travel much by car. But this is not surprising, as the rise in incidence increases every day.

On Thursday, Asian stock indices are decreasing during trading amid a decline in the US stock market the day before. Japan's Nikkei 225 Index (JP225) decreased by 2.88% since the opening, Australia's ASX 200 (AU200) lost 2.74%, but Hong Kong's Hang Seng (HK50) feels good, showing an increase of 0.33%.

Main market quotes:

S&P 500 (F) (US500) 4,700.58 −92.96 (−1.94%)

Dow Jones (US30) 36,407.11 −392.54 (−1.07%)

DAX (DE40) 16,271.75 +119.14 (+0.74%)

FTSE 100 (UK100) 7,516.87 +11.72 (+0.16%)

USD Index 96.16 −0.10 (−0.10%)

Important events for today:
  • - Japan Services PMI (m/m) at 02:30 (GMT+2);
  • - UK Services PMI (m/m) at 11:30 (GMT+2);
  • - US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • - US ISM Services PMI (m/m) at 17:00 (GMT+2);
  • - US Natural Gas Storage (w/w) at 17:30 (GMT+2).

by Justforex, 2022.01.06

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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