Dubai: Global equities are expected to remain under increasing selling pressure after the US Federal Reserve last week offset ripples in equities, bonds and foreign exchange markets.
The US Federal Reserve has indicated that it is talking about reducing its bond-buying program, and the fact that it wants to step down from some of its easy policies has made investors worldwide anxious and a sell-out across the bank cause. It is considered a trading theme in the coming weeks.
The uncertainty has increased the focus on the Fed and inflation, which is why comments from Fed Chairman Jerome Powell will also be important in the coming week on Tuesday.
The last step is the first serious reversal of the easy policy the monetary regulator introduced to add liquidity to markets when the economy closed last year due to the health crisis.
The purchases, which amount to $ 120 billion per month, will gradually decrease once the Fed decides to delay and end the purchase of the bonds, or in other words the quantitative easing. It could then open the door to interest rate hikes, which the Fed would now plan for in 2023.
Should investors buy or sell?
When it comes to whether investors should buy shares at the moment or not, the market experts believe that it is intended to make shares fall a little more in the coming days, but then it will again provides the opportunity to start buying.
The Federal Reserve meeting on Wednesday made financial markets turbulent. The dollar jumped, equities fell and bond yields meant higher short-term interest rates in the future.
This information moved all asset classes this week, especially commodities (except oil), as the US dollar continued to climb against other major currencies. Since most products are priced in dollars, steep drops have been seen in copper, steel, wood and palladium, to name a few.
Under U.S. standards, the Dow fell 3.5 percent, recording its worst week since October. The S&P 500 fell 1.9 percent for the week, its biggest weekly loss since February, and the Nasdaq lost just 0.3 percent.
Several analysts warn that the sale of the market is unlikely to be done, and warn investors that it will continue next week.
As the Fed is currently in alert mode, it could be cruel for markets, with the added fact that late June is generally a difficult time for equities when analyzing stock market data historically.
After a challenging week for stock investors, next week looks relatively quiet on the corporate calendar, but heavy on economic data.
Important US inflation data ahead
In the US, there are also important inflation data late in the coming week, when the Fed’s preferred inflation measure, the inflation index for personal consumption expenditure, is announced.
Investors will approach the second half of the year with the knowledge of the Fed’s inflation forecasts, which now stand at 3.4 percent, as well as their intention to raise interest rates twice in a few years.
Elsewhere, market experts are also evaluating how the Bank of England is not expected to change policy during its decision this week, but comment on how the UK’s growth and inflation outlook are worth noting.
But just like the US Federal Reserve, many expect the BoE to indicate that it also intends to raise interest rates at least twice in 2023.