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Daily Wrap Up 18 July 2022

18 Jul 2022 04:47 PM

Stocks rally as large rate hike fears fade

Stocks markets are pushing higher this afternoon as traders believe the Federal Reserve might not be as hawkish as previously predicted. A report over the weekend indicated the bank would lift rates by 0.75% later this month, but a few days ago there was chatter of a 1% hike. It seems as if those fears have been put to bed for now and that sparked a wave of buying. European benchmarks are up between 0.5% and 8%. A headline from Gazprom, the state-owned Russian gas supplier, caused a bit of a stir as the company said it will not be able to fulfil its entire gas obligation to Europe. That promoted eurozone stocks to retreat from their highs. Energy concerns are hanging over Germany and Italy as they are heavily dependent on gas from Russia. It is likely those fears will increase as we move out of summer and edge towards winter.

The prospect of the Fed only carrying out a 75-basis point hike rather than a 100-basis point lift is helping the S&P 500 and the NASDAQ 100 as the markets are up 0.7% and 1.2% respectively. The 10-year yield is edging higher, but it is still below the 3% mark. Last week inflation fears were running high due to the CPI and the PPI reports but now it seems as if the Fed will not hike by 1%, so that has encouraged some buyers to set into the fold. The Dow Jones hit a level last seen almost three weeks ago, and that highlights the bullish sentiment. It has been another tough day for the US dollar as it is down 0.7%. It has lost a lot of ground to the euro and the British pound; it is even lower versus the Japanese yen. Last Thursday, when worries about US inflation jumped, that pushed up the dollar to a fresh 20-year high, but in light of that report claiming the Fed will shy away from a 1% hike, the greenback has lost some of its appeal. Gold is benefitting from the tumble in the dollar. WTI and Brent crude are up over 4% as President Biden failed to get Saudi Arabia to agree to ramp up oil production. It appears that OPEC+ are not in any rush to hike output, hence the squeeze in supply.


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