Across Europe after weeks of bad news, stocks rose in anticipation that the US Federal Reserve will make a change to their current policy and raise interest rates. Markets in Europe have reacted positively with the FTSE 100 rising 1.3% in London after opening, while over in France and Germany both the CAC and the DAX gains exceeded 2% (2.1% and 2% respectively).
A raise from the US Federal reserve would mark its first interest rate rise for over 4 years following calls to take steps to ease the current inflation issues in the US which has largely been attributed to ongoing global issues from the COVID-19 pandemic to the current Russian invasion of Ukraine.
Given those volatilities, the Fed isn’t expected to make dramatic and long-lasting changes, but it’s widely expected that rates will rise. However, analysts have warned that should the Fed not make changes, markets should expect to see continued fluctuations.
There is also some potential further good news as Ukrainian President Volodymyr Zelensky has hinted at positive moods during the latest round of negotiations with their Russian counterparts giving markets fresh hope that an end to a conflict that has already resulted in turmoil may be a step closer to a conclusion.
Will Russia Make Payment?
Part of the reason for the positive mood in the talks appears to be that Russia is beginning to feel the pinch of the large package of sanctions placed on them and movements from several major economies that may see them lose their seat at the energy supply table. There has been talk of Russia defaulting on a bond payment which has raised questions that despite loud proclamations of defiance from the Kremlin about their financial autonomy, all might not be as well as the official statements suggest.
With a $117m (£90m) interest payment due on a US dollar bond, Russia has said it will pay, but it will pay in roubles. If they do and unless they make the additional payments within 30 days, they will likely default – raising more questions about the state of the Russian economy. This would mark a dramatic turnaround for the country given that only a short while ago its credit rating was seen as one of the most secure globally.
US and Asia Rebounding
The plight of the Russian economy appears to be at odds with the news of both the European markets rebounding, and it seems the US and Asia are seeing positive signs. The US has seen the S&P (0.9%), Dow (0.7%) and the Nasdaq (1.3%) all make gains ahead of a predicted 0.4% rise in US retail sales following a poor December.
In Asia, news from Beijing that there were policies incoming to stimulate the financial markets with new economic boosts saw the markets rise across the continent with Japan’s Nikkei climbing 1.6%, the Shanghai Composite climbing 3.5% while in Hong Kong, the Hang Seng rose dramatically, soaring more than 9%.
For now, as the market volatility continues, it remains all eyes on the US Federal Reserve and the talks in Russia.