After a subdued start, US stock markets rebounded on Thursday. The S&P 500 climbed +1.0% and the Dow Jones advanced +0.5%. The Nasdaq Composite gained +1.4%.
In Asia, the markets trade mixed on Friday. The Nikkei gains +0.4% in Tokyo. The Hang Seng advances +0.2% in Hong Kong and the Shanghai Composite trades slightly lower.
The euro traded on Friday just below USD 1.02. and at USD 1.0183, it cost about as much as on the previous evening. Thus, the common currency has benefited only briefly from the interest rate hike in the euro area, although it was stronger than expected. Gas supplies from Russia remain a factor of uncertainty. According to reports from the network operator, gas has so far been flowing steadily through the Nord Stream 1 pipeline. In addition, the government crisis in Italy is dampening market sentiment and is also weighing on the euro.
As expected, the European Central Bank (ECB) decided at today's monetary policy meeting to raise key interest rates for the first time in eleven years. With a rate hike of 50 basis points, the central bank is bolder than anticipated: the majority of analysts forecasted a rate hike of 25 basis points. As a result, the deposit rate is now at 0%. The main refinancing rate rises to 0.5% and the marginal lending rate stands at 0.75%. In addition, the monetary authorities have decided on a new anti-crisis program. The Transmission Protection Instrument (TPI) aims to curb fragmentation within the currency area and to ensure that monetary tightening does not unduly burden highly indebted countries such as Italy.
With the surprisingly large interest rate hike, the ECB is responding to the rapid price growth in the currency area. Annual inflation hit a new record in June, climbing to +8.6% from +8.1% in May.
Italy is set for early elections following the resignation of Prime Minister Mario Draghi. The Italian President Sergio Mattarella ordered the dissolution of both chambers of parliament on Thursday. The elections are scheduled to take place on September 25. Originally, they were scheduled for spring 2023. Draghi's government will remain in office until there is a new prime minister. Italy cannot afford a political stalemate: The country needs to adopt further reforms before it can draw reconstruction funds from the pandemic aid fund. In addition, parliament must approve the budget for 2023.
On the Milan Stock Exchange, the Italian benchmark index lost -0.7%. The risk premium for ten-year Italian government bonds against German Bunds widened again in the late afternoon, after it had shrunk immediately after the ECB decision.
|10:00||EZ||Purchasing manager index, manufacturing (July)||52.1|
|15:45||US||Purchasing manager index, manufacturing (July)||52.7|
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