U.S., Global Markets Accelerate Declines After U.S., U.K. Brazil, Switzerland Lift Rates

Barry Adams
16 Jun, 2022
New York City

U.S. stocks reversed solid days of Wednesday and accelerated declines after central banks around the world lifted rates. 

On Wednesday, the Fed lifted its fed funds target rate range by 75 basis points between 1.5% and 1.75%.  

The Fed also lowered its 2022 economic growth outlook to 1.7% from 2.8% in March and unemployment rate to 3.7% from 3.5%. 

The Fed's hawkish tone was welcomed by investors on Wednesday but sparked the fears of economic slowdown and higher jobless rates. 

Investors around the world interpreted the Fed's willingness to fight inflation as a signal for the looming worldwide slowdown. 

Markets around the world plunged after the rate hike. 

The S&P 500 declined 2.6% to 3,695.50 and the Nasdaq Composite fell 2.6% to 10,804.40. 

The DAX index declined 3.2% to 13,071.74, the CAC-40 index plunged 2.5% to 5,878.17, and the FTSE 100 index dropped 3.1% to 7,049.01 

 

Brazil, Switzerland, UK Lift Rates 

 

The Bank of England lifted rates by 25 basis points to 1.25%, fifth consecutive rate increase in a row. 

The pound dropped 0.78% to $1.2085 after the rate decision. 

The Bank of England also lifted its inflation outlook to "slightly above 11%" by October on rising energy prices. 

The U.K. economy unexpectedly declined 0.3% in April after falling 0.1% in March, the Office of National Statistics had reported a week ago. 

The back-to-back monthly economic growth declines were last seen in March and April 2020. 

The Swiss National Bank lifted its key benchmark rate by 50 basis points from -0.75% to -0.25%, the first rate increase since 2007. 

The SNB also said it is prepared to act in foreign exchange market and defend the Swiss franc if necessary. 

SNB President Thomas Jordan said that the anticipatory rate increase step was taken to stem the inflation spreading from goods and services sectors of the economy that are not affected by the war in Ukraine and pandemic restrictions. 

Banco do Brasil lifted its benchmark Selic interest rate as expected by 50 basis points to 13.25%. 

The rates were as low as 2% in March 2021 and are now at the highest levels since 2017. 

The policy makers estimated an inflation rate of 8.8% in 2022, ahead of its target rate of 3.5%, and 4% in 2023, higher than its policy assumption rate of 3.25%. 

 

U.S. Weekly Jobless Claims Rise, Housing Starts Fall 

 

The seasonally adjusted weekly jobless claims for the week ending June 11 were 229,000, a decline of 3,000 from the previous week, the Department of Labor reported today.  

Jobless rate held at 0.9% and matched the unrevised rate in the previous week. 

U.S. housing  starts in May fell to 1.55 million annual rate , a decline of 14.4% from April's revised estimate of 1.81 million rate and 3.5% lower from the 1.605 million annual rate a year ago. 

Building permits in May were at 1,7 million annual rate, a 7% decline from April and housing completion rate was 1.465 million, a 9.1% higher than the rate in April and 9.9% higher than the rate a year ago.