Strong declines in America. EBC turns off printers

Thursday’s session on the New York Stock Exchange saw strong declines in the major indices. The market is said to have been afraid to see the penultimate source of easy money cut.

The Dow Jones ended the day down 1.94%, down to 32,272.79 points. The S&P 500 fell 2.38% to 4,017.82 points. The Nasdaq fell by 2.75% and stopped at 11,754.23 points.

Today’s highlight was the announcement by the European Central Bank. The European Central Bank will end its bond-buying program on July 1colloquially known as “money printing”. It’s faster than expected. Such a decision was not expected until September. The European Central Bank also announced a 25 basis point interest rate hike. in July and another unknown rise in September. This sparked speculation that this could be a 50 basis point move.

The Fed is also planning for the next 50 point hikesThat’s in June It started the process of reducing its total balance sheet (QT)Which means “absorption” of liquidity from the banking sector. The Bank of England also ended quantitative easing earlier. So just stay on the battlefield Head of the Bank of Japan “printers”.

And so, within a few months of 2022, the world’s largest central banks are moving away from a very expansionary monetary policy and are in the process of tightening it (or rather trying to normalize). This hits the valuation of almost every financial asset, from bonds to stocks. All this is due to extremely high inflation, which even in advanced economies approached 10%, reaching levels not recorded for several decades.

So far, it does not appear that such high inflation will abate quickly. The rise in crude oil prices is particularly worryingwhich was the most expensive since March on Wednesday and Thursday, and remained above $120 a barrel. Gasoline prices are at their highest in the United States, approaching $5 a gallon for the first time in history.

Investors understand that costs will continue to rise, and over time it will become more and more difficult for companies to raise prices and pass costs on to customers. I think that’s one of the reasons we’re seeing a lot of pressure on stocks – said Randall Kruszner, University of Chicago economics professor and former Federal Reserve governor, citing PAP.

Therefore, investors will be eagerly awaiting tomorrow’s report by the US Bureau of Labor Statistics. The CPI statistics for the month of May in the US will be released at 14:30 Polish time, an hour before the start of the session in the spot market. Economists expect a reading of 0.7% on a monthly basis and 8.3% on an annual basis. The market could receive higher annual dynamics particularly badly, as it would undermine the hypothesis that the peak of inflation in the US was recorded in March (at 8.5%).

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