The main benchmark, the Oslo Poor’s, rose cautiously from the start on the first trading day of the week on Tuesday morning, but then jitters and lower oil prices weighed on the stock market.
On Tuesday afternoon, the main index fell about 0.2 percent before escalating the decline in the past hour and a half, driven in part by heavyweights such as Equinor which fell 2.6 percent. At about two o’clock in the afternoon, a barrel of North Sea oil was traded for $79, and the price fell by 3.3 percent until 4:30 pm.
The US stock exchanges also contributed to the decline, and the main index was trading 1.5 percent lower at the time of closing than when the stock exchange opened.
The development in the stock market comes at the start of what will be a hectic week in the financial markets. At 11.00 am on Tuesday, Eurostat provided preliminary inflation figures for the month of April for the Eurozone, before announcing three interest rates in the next two days. Inflation in the eurozone turned out to be somewhat higher than expected.
The US Federal Reserve is only in Norway on Wednesday evening, Norway time, before the European Central Bank and the Bank of Norway follow on Thursday morning.
In the interest rate market, a wait-and-see situation prevailed in the morning hours of Tuesday.
Tense atmosphere in the interest rate market
The Australian dollar jumped after the decision to raise interest rates by 0.25 percentage point to 3.85 percent. According to Bloomberg estimates, only nine out of 30 economists expect an increase. However, the country’s inflation of around seven percent remains too high, said central bank governor Philip Lowe, who also warned that it will take some time before price inflation falls to the target.
The yield on two-year US government bonds, which are more sensitive to short-term expectations of interest rate developments, was around 4.14 percent on Tuesday morning, up about 14 basis points since before the weekend.
The 10-year interest rate was around 3.56 percent Tuesday morning, up somewhat less in the same time period.
The day before the Federal Reserve’s interest rate decision on Wednesday evening Norwegian time, the 0.25 percentage point interest rate increase was priced at roughly one hundred percent. If that happens, the key interest rate in the United States will be raised to the interval between five and 5.25 percent. It is the highest level since just before the financial crisis.
Moreover, the market is putting up a slight possibility that the first rate cut will come as early as November this year.
The Fed’s interest rate meeting starts on Tuesday and ends as usual tomorrow, Wednesday evening, Norwegian time. Central Bank Governor Jerome Powell will then present the Monetary Policy Committee’s latest interest rate decision as well as its opinion on the outlook.
Possibility of double lifting
In the eurozone, the European Central Bank’s interest rate decision is presented on Thursday morning, a few hours after Norges Bank made its decision.
From the ECB, a 0.25 percentage point increase is fully priced in, with a 0.5 percentage point increase also slightly likely. However, there is no doubt that there will be an increase, as inflation in the Eurozone remains at high levels.
The main interest rate in the eurozone is currently three percent.
The figures provided on Tuesday show that many countries in the region are still struggling with skyrocketing prices. The overall price increase was seven percent in April, while core inflation was 5.6 percent. Up front, an annual rate of 6.9 percent was expected, according to Bloomberg estimates. Core inflation was expected to be 5.6 percent year on year. In March, price growth in the region was 6.9 percent year-on-year.
Slovakia, Estonia and Lithuania all recorded price increases of more than 13 percent, while Latvia, with an annual increase of 15 percent, clearly leads the list year-on-year in April.
Sold to JP Morgan
On Monday, it also became clear that crisis-stricken First Republic Bank was being taken over by JP Morgan in a deal that was canceled by US insurance fund FDIC. As you know, the bank was caught in the middle of the eye of butter when it broke out as the worst sector in March and experienced several dramatic price drops in the past week.
The First Republic’s bankruptcy was the second-largest in US history, bested only by the collapse of Washington Mutual during the 2008 financial crisis. The agreement includes JPMorgan taking over all deposits, totaling $93.5 billion, plus most of the bank’s total assets, amounting to $229.1 billion. .
First Republic had hoped to negotiate an agreement without putting it under administration, but that was not possible.
All bids received were with the condition that the FDIC cover some potential losses from the First Republic purchase, possibly through FDIC acquiring the majority of First Republic’s bond portfolio.
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