Fed bankers make investors sit up and take notice
High-ranking representatives of the US Federal Reserve are thinking aloud about upcoming monetary easing measures. Wall Street is happy to hear this, with the US indices closing higher. The price of gold is also rising, for the fourth day in a row.
Public musings about an interest rate cut by representatives of the US Federal Reserve (Fed) have brightened the mood on Wall Street. The Dow Jones index of blue chips closed 0.2 percent higher at 35,416 points on Tuesday. The technology-heavy Nasdaq advanced 0.3 percent to 14,281 points. The broad-based S&P 500 gained 0.1 percent to 4554 points.
There are good economic arguments for monetary easing if inflation continues to fall for a few more months, Fed Director Christopher Waller had said. However, he did not want to commit himself to a specific period of time. In addition, the head of the Chicago Fed district, Austan Goolsbee, said with regard to inflation: "It is declining, it is not yet below target, but in 2023 we are on track to achieve the sharpest decline in inflation in 71 years."
The US indices then turned positive after a lethargic start. In addition, the yield on the two-year government bond, which is particularly sensitive to possible changes in monetary policy, fell to 4.763%. The much-noticed yield gap - known as the spread in the jargon - to the German two-year government bond also narrowed. On the foreign exchange market, the dollar index fell by 0.4 percent to 102.76 points, its lowest level since mid-August. Speculation about an end to the Fed's interest rate hike had already pushed the world's leading currency down by around three percent in November. Overall, market expectations of a rate cut of at least 25 basis points in May 2024 rose to almost 63% from 50% previously, according to data from the CME exchange.
The oil price rose in view of the meeting of the Opec+ states planned for Thursday, which includes the members of the oil export cartel as well as other producing countries such as Russia. North Sea Brent crude and light US WTI crude each rose by around two percent to 81.57 and 76.39 dollars per barrel (159 liters) respectively. An extension or deepening of the production cuts is expected. In addition, the weaker US currency is also supporting the oil price, as crude oil traded in dollars is therefore cheaper for investors in other currency areas.
Gold, which is also traded in dollars on the global market, also benefited from this. The price of gold climbed for the fourth trading day in a row, reaching its highest level for more than six months with a gain of 1.4 percent. Investors piled into gold miners in the hope of good business. Industry giants Newmont and Barrick Gold gained a good six and around five percent respectively.
Among the individual stocks, the shares of chip manufacturer Micron fell by just under two percent. This was due to a change in forecast. By contrast, the financial services provider Affirm was able to build on its gains from the previous day with an increase of over eleven percent. Increased online business on "Cyber Monday" and the "order now, pay later" offer boosted Affirm during the bargain day.
The positive sentiment on Wall Street is reflected in the performance of the Dow Jones index, which closed higher following the Fed's monetary easing discussions. Share prices of blue-chip companies like Dow Jones are closely watched in share trading circles.
Furthermore, the potential interest rate cut proposed by the Fed has sparked interest in the broader market, leading investors to closely monitor share prices on Wall Street, especially those listed on the S&P 500 and Nasdaq.
Source: www.ntv.de
