US markets opened on Monday with Dow Jones futures trading slightly lower, accompanied by S&P 500 and Nasdaq futures also lower. In particular, futures of the Dow Jones fell by 0.2% compared to forecasts, those of the S&P 500 by 0.3%, and those of the Nasdaq 100 by -0.4%.
The US stock market soared last week thanks to the Federal Reserve’s decision to raise rates by 0.25%. While this move was anticipated, and Chairman Powell has stated that there will be no further rate cuts for the remainder of the year, it has not had a material effect on the stock market. The 10-year Treasury yield rose two basis points to 3.55%.
During Wednesday’s press conference, Federal Reserve Chairman Jerome Powell said that the deflationary trend has begun, causing the stock market to rally. This is because investors have assumed that the cap interest rate will be lower and that there will be a greater chance of rate cuts in the latter part of 2023.
Despite tepid financial results from major tech companies and a solid jobs report on the week’s final day, the rally hasn’t been denting.
Investors will pay close attention to what Jerome Powell, chairman of the Federal Reserve, will say at the Economic Club of Washington on Tuesday. Last week, his words about discretion prompted investors to buy more bonds, ignoring that the central bank had hiked rates.
Hong Kong stocks edged down on Monday by around 2% in the first trading session of Asian markets. Furthermore, the Shanghai Composite fell nearly 0.8%.
The decline in Hong Kong stocks appears to have been triggered by the low performance of the US stock market on Friday. It could be due to the intensification of disagreements between the US and China about the alleged Chinese spy balloon incident, which was defused the day before.
On Friday, the People’s Bank of China significantly adjusted the exchange rate between the yuan and the US dollar following a jobs report that exceeded expectations. This made the dollar worth more than other foreign currencies.