Road signs and red traffic lights on the corner of Wall Street and Broadway in New York, USA.
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The report comes from today’s CNBC Daily Open, our new international markets newsletter. The CNBC Daily Open gives investors a quick overview of everything they need to know, no matter where they are. Do you like what you see?you can subscribe here.
what you need to know today
BOE’s large-scale surprise interest rate hike
this The Bank of England raised interest rates by 50 basis points, bringing the rate to 5%. The market is betting on a 25 basis point hike. But the UK’s inflation data for May was very poor: last month’s inflation rate was unchanged from April, while core inflation actually rose from 6.8% to 7.1% year-on-year. If inflation remains stubborn, expect more surprises from the BoE.
popular hiking tours in Türkiye
Turkey’s central bank, under new governor Hafize Gaye Erkan, doubled the country’s interest rate from 8.5% to 15%. That has partly addressed Turkey’s soaring inflation, which hit 39.6 percent in May, helped by President Recep Tayyip Erdogan’s insistence on keeping interest rates low. But some analysts have criticized the hike as too dovish – with most expecting rates to reach 20%. y 2
Increased capital requirements
Federal Reserve Chairman Jerome Powell said in a second day of Senate testimony that the new rules were unlikely to apply to banks with less than $100 billion in assets. Among other conditions, the rules will increase the amount of capital banks need to maintain. Separately, FDIC Chairman Martin Gruenberg said the rules are expected to take effect next year.
mixed market
U.S. stocks were mostly higher on Thursday, with the S&P 500 and Nasdaq Composite snapping a three-day losing streak, while the Dow Jones Industrial Average was little changed. The pan-European Stoxx 600 fell 0.51%, but one stock outperformed: British online grocer Ocado surged 32.05% on speculation that Amazon could buy the company.
(PRO) Market bearish, stocks overvalued
Despite the S&P 500’s recent gains, the index is still trying to surpass the highs reached in January 2022 — which would usher in an official bull market. However, market strategists at UBS and JPMorgan have warned that stocks may be overvalued.
the bottom line
Investors have been lulled into a sense of security that U.S. inflation is falling, albeit at a slower pace than expected, and that interest rates will gradually fall as the beast is killed. That’s been the fuel behind the market’s astonishing gains in recent weeks.
But investors are being sent inexorably back to a world they thought they had left behind — in other words, a world of constant rate hikes. Fed Governor Michelle Bowman believes that “additional policy rate hikes are necessary” — as long as they are “sufficiently restrictive” — so that inflation falls further.FOMC member Bowman largely agrees Powell said on Wednesday that despite a pause in rate hikes in June, further rate hikes are still warranted. (“Pause” is word powell doesn’t likeIncidentally, this reveals what the Fed is thinking. )
The prospect of more rate hikes may be why investors have turned to technology stocks. amazon, apple and Microsoft Climbed all yesterday. I know, that sounds contradictory. Aren’t growth-dependent tech stocks the most affected by high interest rates? High interest rates erode the value of future earnings?
My sense is that investors see AI as a moat to profitability, an inviolable barrier to interest rates. Well, anyway, here’s the hope.
Still, the excitement over AI may not be enough to sustain the overall market. Despite gains of nearly 1% on Thursday, Nasdaq Looking to break an eight-week winning streak. same, Standard & Poor’s The 0.37% gain may be too small to sustain a five-week streak of closing gains.
Some analysts hope that the bullish market will move forward and see red. But the hue now looks less like a matador’s red cape and more like the red light of a traffic jam.
Correction: This article has been updated to correct the date of the S&P’s all-time high.