U.S. and Global Markets Await Rate Decisions

Barry Adams
01 Feb, 2023
New York City

Benchmark indexes were in a holding pattern ahead of the rate decision this afternoon from the Federal Reserve. 

Financial markets are expecting policymakers to increase rate by 25 basis points after seven rate increases in 2022. 

Despite multiple rate hikes last year, the economy continues to expand and employment keeps growing and inflation remains far above the Fed's preferred target rate of 2%. 

The European Central Bank and the Bank of England are also expected to release rate decisions on Thursday. 

 

U.S. Private Sector Job Growth Slowed In January

Private sector job growth slowed more than expected in January, according to a monthly report released by the payment processor ADP Wednesday.  

Private sector net job additions declined to 106,000 in January from the upwardly revised 253,000 in December. 

The employment in the service sector rose 109,000 after employment in leisure and hospitality expanded.  

"In January, we saw the impact of weather-related disruptions on employment during our reference week. Hiring was stronger during other weeks of the month, in line with the strength we saw late last year," said ADP chief economist Nela Richardson. 

Jobs in large businesses increased 128,000 and employment at mid sized businesses advanced 64,000 jobs, while employment at small businesses declined 75,000, the ADP report showed. 

The U.S. Labor Department is scheduled to release its monthly non-farm payroll report on Friday and economists are anticipating job growth to slow to 175,000 from 223,000 in December.  

Jobless rate in January is expected to advance to 3.6% from 2.5%. 

 

U.S. Indexes On Pause Ahead of Rate Decision 

The S&P 500 index edged lower 0.2% to 4,068.91 and the Nasdaq Composite index fell 0.04% to 11,579.75. 

Crude oil increased 6 cents to $78.93 a barrel and natural gas futures fell 9 cents to $2.58 a thermal unit. 

The yield on 2-year Treasury notes declined to 4.19%, 10-year Treasury notes inched lower to 3.48% and 30-year Treasury notes decreased to 3.61%. 

 

European Markets 

European markets traded down ahead of rate decisions across the Atlantic. 

The Euro Area inflation in January declined to an eight-month low to 8.5% from 9.2% in December. 

Core inflation remained stable at 5.2%, Eurostat said in a preliminary statement on Wednesday.

The DAX index increased 0.5% to 15,195.85, the CAC-40 index gained 0.2% to 15,195.85 and the FTSE 100 index edged up 0.01% to 7,772.77. 

The euro inched higher to $1.089, the British pound advanced to $1.232 and the Swiss franc traded up to 91.68 U.S. cents. 

Brent crude oil price decreased to 74 cents to $84.67 a barrel and the Dutch TTF natural gas futures rose 3.4% to €59.31 per MWh. 

 

Asian Markets 

Asian markets paused ahead of rate decisions in the U.S. and Europe and a private survey showed manufacturing in China shrank at a slower pace in January but stayed strong in India. 

The Nikkei 225 index increased 0.07% to 27,346.88 and the yen edged lower to 129.57 against the U.S. dollar. 

The Shanghai Composite Index increased 0.9% to 3,284.92 and the Hang Seng index advanced 1.1% to 22,072.18. 

Stocks in Mumbai traded mixed after the central government released the Union Budget with a focus on improving transportation investment and accelerating manufacturing industry growth. 

Central government estimated spending in fiscal year 2024 ending in March to increase 7.5% to ₹45 lakh crore, including ₹5.94 lakh crore for defense and increase railways spending by 48% to ₹2.4 lakh crore.

The Finance Ministry is expecting the fiscal year 2024 nominal growth to slow down to 11% from the estimated 15.4% in the fiscal year 2023.

The Sensex in Mumbai traded higher 0.3% or 158.18 points to 59,708.08 but the Nifty index declined 0.3% or 45.85 points to 17,616.30. 

The Indian rupee edged slightly lower to 81.74 against the U.S. dollar.