US stocks rise as central bank decides on rates

US equities increased on Monday as the world’s financial markets headed into a potentially crucial week. Central banks on both sides of the Atlantic are anticipated to announce a significant shift in their approach to fighting inflation by lowering the rate of interest rate increases.

Wall Street’s benchmark S&P 500 closed 1.4% higher after falling previous week, while the heavily weighted Nasdaq Composite rose 1.3%.

The advances occur ahead of significant monetary policy meetings at the US Federal Reserve, the Bank of England, and the European Central Bank. Despite persistently high inflation rates, all three are expected to hike interest rates this week when they meet separately.

Investors are anticipating the release of the US consumer price index data for November as well as the Federal Reserve’s most recent economic forecasts on unemployment, gross domestic product, and inflation. Traders are looking for cues on where interest rates will settle later this year and when they might start to decline.

The Fed’s main policy rate is expected to peak at around 5% in the spring and then decline in the second half of next year as inflation slowly returns to the central bank’s objective of 2%, according to market predictions.

“We do feel that market consensus still underappreciates the risk of inflation staying higher longer and also is dangerously second-guessing the Fed in terms of [second half of 2023] rate cuts,” said industry expert Chris Turner.

Events this week will determine whether investors begin next year focused on inflation or the threat of recession, Turner added.

Despite falling more than 8% since September, the dollar increased on Monday versus a basket of six international counterparts, partly because to expectations that US inflation has peaked and China’s tight zero-Covid policies have begun to loosen.

After rallying at the conclusion of the previous week, Chinese technology and real estate sectors led losses as Asian shares opened this week down.

The Hang Seng index in Hong Kong dropped 2.2%, the CSI 300 in China dropped 1.1%, and the Kospi in South Korea dropped 0.7%. The Topix in Japan fell 0.2%.

While the Hang Seng Tech index shed 4.1 percent, the Hang Seng Mainland Properties index, which covers some of China’s major developers, dropped 7.5%. A spinoff of China’s largest real estate company, Country Garden Services, saw a loss of up to 17%, while search engine Baidu saw a loss of 7%.

The regional Stoxx 600 index for Europe down 0.6%, and the FTSE 100 index for London fell 0.4%. Oil prices increased somewhat on Monday, reversing earlier losses. Brent crude, the global oil standard, increased 2.5% to close at $77.99 per barrel, up slightly from its yearly low.