The stock markets of the United States started a downward movement yesterday, which was provided by news from the Federal Reserve Service. The decline started after it was announced that the regulator was not going to revise the level of interest rates, since the economy was not yet strengthened enough and its growth would not be rapid in the near future. Thus, such a policy should last until 2022.
The Dow Jones Index began to decline rapidly after the rally, which lasted for several weeks. This was followed by the S&P 500. On the contrary, the NASDAQ Composite index was able to reach a level above 10,000, which has not happened to it yet.
The reason for the mixed dynamics in the market is the Federal Reserve Service's speech. The regulator noted that it is not necessary to hurry with the widespread lifting of quarantine measures related to COVID-19. Despite the fact that weakening has already begun and many enterprises have resumed their activities, economic growth has not yet begun and the recovery process will be slow and problematic, especially since there is another threat of a recurrence of the events of recent months: the number of cases in the United States has risen sharply, which has not been for about five weeks.
According to preliminary data, total production in America will be reduced around 6.5% in terms of a year. This figure will drop even lower - by 5% next year.
Today, market participants are waiting for a report on the number of jobs and manufacturing activity. In addition, some large companies must publish data on their income, and this raises many questions.
It can be noted that the market will change under the pressure of several factors today. First, investors are worried about the number of applications for unemployment benefits in the United States: according to preliminary forecasts, it should be at the level of 1.55 million. It can be recalled that data from last week amounted to 1.87 million. Thus, the indicator is expected to decline which should support the market. If this does not happen, the decline will continue and will be even more rapid.
The second factor is the producer price index, which is traditionally considered an indicator of inflation. Experts argue that the consumer price index should rise over the past month by 0.1%. The previous period was marked by a decline of 1.3%. This should also add positivity.
For the third factor, we can highlight the publication of data on the income of large companies. Investors are particularly interested in this because the value of shares on stock exchanges has been growing for quite a long period, and the real profit, on the contrary, has been seriously affected by the coronavirus pandemic.
All these factors today must either push the market to further growth or put pressure on it and cause a decline.
On the other hand, European stock markets were marked by negative dynamics this morning. This was also caused by the gloomy prospects of the Fed of the United States of America. As a result, market participants did not want to take risks and rush to fix their profits.
In general, the Stoxx Europe 600 index increased approximately by 30%, while its minimum value was recorded in March.
The German DAX index declined by 2.8%, France's CAC 40 index by 3%, the UK FTSE index by 2.6%. Following the downward trend, the overall Stoxx Europe 600 index also declined. It fell by 2.5%.
At the moment, the securities of those companies that were the first to take the shock wave of COVID-19 pandemic were most affected. In particular, a significant decline is recorded by air carriers and catering.
Today, the European stock market is waiting for the results of the Eurogroup's meeting, on the agenda of which is the further functioning of the Eurozone economy recovery fund. It can be recalled that countries can't reach an agreement until now and are sending a bill to organize the fund for revision.
The material has been provided by InstaForex Company - www.instaforex.com