Global Market Trends
The Asian stocks fell on Thursday, after the Federal Reserve warned that Donald Trump’s trade war would probably increase US inflation again and dampen economic growth. Oil prices also dropped as investors waited for developments in the Israel-Iran conflict.
Federal Reserve Meeting
The US Central Bank met on Wednesday to discuss monetary policy in light of the President’s tariff. As expected, the Fed lent again on ice for a fourth meeting in a row and said in a statement that "the uncertainty about the economic prospects is reduced, but remains increased". The Fed also lowered its economic growth forecast for this year and increased the inflation and unemployment expectations.
Economic Prospects
Boss Jerome Powell described the economy as "still solid", but added that "the tariffs are probably increasing prices this year and weighing up economic activity". He said that the bank was "well positioned to wait to learn more" before considering changes to the interest rates. The so-called DOT plot diagram of the Fed forecast two cuts this year.
Trade War Concerns
Powell stated that "ultimately, the costs for customs have to be paid and part of it will fall on the end consumer". He added that the bank wants to "only see a little bit of it before we make judgments prematurely". Since Trump increasingly demanded the bank to lower the tariffs, Powell said: "We will make smarter and better decisions if we only wait a few months".
Market Reaction
Hours before the decision, the President said: "We have a stupid person, frankly, at the Fed". In the White House, he added: "We have no inflation, we are only successful and I would like to see that interest rates will fall". The Fed’s assessment shows that the economy is in good condition and is geared to current economic data, according to Tai Hui of JP Morgan Asset Management.
Geopolitical Tensions
The Fed comments have already strengthened the weak feeling for the retail soils when Trump considered whether they should join Iran. He stated that he was still examining such a step and that Iran had been looking for the search for negotiations. The top leader of Iran, Ayatollah Ali Khamenei, had previously had a defiant note and rejected Trump’s call for "unconditional surrender".
Oil Prices
The oil prices were dropped after another volatile day on Wednesday without specific signs of escalation. Analysts said that the main concern for retailers was the possibility that Tehran will close an important shipping lane through which an estimated fifth of the global oil supply flows.
Key Figures
The main market indices and commodity prices were as follows:
- Tokio – Nikkei 225: 0.7 percent at 38,597.16
- Hong Kong – Hang Seng Index: 1.0 percent drop in 23,486.26
- Shanghai – Composite: Sunk by 0.3 percent at 3,377.19
- Euro/dollar: $ 1.1455
- Pound/dollar: $ 1.3396
- Dollar/yen: up to 145.15 yen
- Euro/pound: at 85.51 Pence
- West Texas intermediate: a falling 0.4 percent at $ 74.86 per barrel
- Brent North Sea crude oil: 0.4 percent at $ 76.40 per barrel decreased
- New York – Dow: at 42,171.66
- London – FTSE 100: Plus 0.1 at 8,843.47
