Jakarta, CNBC Indonesia – The stock market of the United States (US) in free fall on Friday (22/4/2022), while the US dollar reached its highest level in more than 2 years in line with plans to increase interest rates due to rising inflation.
Wall Street’s three major indexes ended down more than 2% a day after Federal Reserve Chair Jerome Powell indicated that the US central bank was preparing to raise interest rates at its May meeting.
The Dow Jones Industrial Average closed down 2.82%, while the S&P 500 was down 2.77% and the Nasdaq Composite was down 2.55%. The MSCI world equity index also fell 2.46%.
Powell previously became a hot topic by saying a 50 basis point rate hike was ready to be knocked at the next Fed meeting. He also said now is the right moment to ‘move faster’ in the fight against inflation.
“The market is very nervous about the possibility of a policy error by the Federal Reserve. When a Fed official suggested a 50 basis point hike, the market started trying to forecast a 75 basis point hike,” said Jamie Cox, managing partner at Harris Financial Group. 23/4/2022).
Meanwhile, the prospect of a rate hike was a breath of fresh air for the US dollar, which surged to its highest level in more than 2 years.
Dollar surge impacts fellow assets safe havennamely gold which posted a 0.9% decline to US$ 1,933.94 per ounce.
US Treasury bond yields also rose as traders braced for higher interest rates. Short-term bond yields hit a 3-year high in Friday’s trading.
The yield on the 2-year note, which is very sensitive to movement in interest rates, briefly rose to 2.789%, the highest since December 2018.
“We are repeating the same message from central bankers, and each time each repetition is pushing short interest rates higher,” said Jim Vogel, interest rate strategist at FHN Financial.
Regarding the commodity market, oil prices fell this week along with concerns about rising interest rates, weaker global demand growth, and the Covid-19 lockdown in China.
Brent crude was down 2% at US$ 106.16 per barrel, while US West Texas Intermediate (WTI) crude was down 2.03% at US$ 101.69 per barrel.
(luc/luc)
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