Opening Bell: SNB Rate Hike Flips Sentiment; Futures, Stocks Lower; Oil Slides

06/16/2022

3 minutes read

2022.06.16 14:41

Market narrative takes a U-turn
Surprise Swiss rate hike adds to market tensions
Treasuries slide

Key Events

The market sell-off resumed on Thursday with futures on the Dow Jones, S&P 500, NASDAQ 100, and Russell 2000 moving back into negative territory, along with European stocks.

US indices rallied yesterday following the 75 basis point hike in US interest rates by the FOMC. However, a change in sentiment this morning, perhaps spurred to some degree by today’s rate hike shocker from the Swiss National Bank, which took markets completely by surprise when it announced a 50 basis point interest rate hike—the first hike of any kind for the SNB in 15 years—exacerbated concerns about future global economic growth. The Bank of England hiked rates 0.25% as expected.

Bitcoin remains under pressure and continues to trade lower.

Global Financial Affairs

All four US index futures were deep in the red notwithstanding the view expressed yesterday by many that the Fed’s 0.75% increase in interest rates—the sharpest uptick since 1994—illustrates that the US central bank believes the economy will not move into recession, even with higher borrowing costs.

Traders had priced in such a steep increase—with some even betting on a 1% lift—so the markets were calm immediately after the announcement. That may be a result of US Fed Chair Jerome Powell saying such large hikes would not be the bank’s standard practice.

All four major US indices jumped at least 1% yesterday during the Wall Street session. The tech-heavy NASDAQ 100 outperformed with a 2.5% surge—after the decision was published.

In Europe, the STOXX 600 Index opened lower today. While the pan-European gauge broke a six-day losing streak after rallying on Wednesday, it did so before the Fed interest rate decision. Thus we’re not seeing the same fickleness in Europe as we do in US trading.

Of course, we could allow for the possibility that today’s futures have been sold off by foreign traders while US traders are more optimistic, which will manifest in trading when the market opens in New York.

Opening Bell: SNB Rate Hike Flips Sentiment; Futures, Stocks Lower; Oil Slides STOXX 600 Weekly

The European index price is holding just above the March lows. If the price falls below 405.61, it will have extended the short-term downtrend, as it establishes a long-term downtrend.

The UK’s FTSE 100 opened lower and is trading at its weakest since Mar. 11.

After the Swiss National Bank rate decision, investor worries increased. The Swiss franc, considered a classic safe haven, soared.

Opening Bell: SNB Rate Hike Flips Sentiment; Futures, Stocks Lower; Oil Slides Swiss Franc Daily

The USD/CHF moved lower from near its high in May 2019. A fall below 0.95 for the pair would complete a Double Top.

Earlier today, Asian stocks were mixed. Many regional indices wiped out the post-Fed relief rally on fears that inflation will continue to increase. Hong Kong’s Hang Seng dropped 2.17%, leading the decline while China’s Shanghai Composite fell 0.6%. Japan’s Nikkei 225 outperformed with a 0.4% gain.

Yesterday’s US stock rally ironically ended a five-day decline, which had scraped 10% off the S&P 500 Index.

Renewed concerns about the impact of monetary tightening on economic output and asset valuations sparked a rout in Treasuries, including the 10-year note. That sent the dollar up for the sixth time in seven days.

Gold jumped despite dollar strength, perhaps confirming Wednesday’s Inverted Hammer.

Opening Bell: SNB Rate Hike Flips Sentiment; Futures, Stocks Lower; Oil Slides Gold Daily