Putin and the Fed combine to put dampener on Wall Street

The mood on Wall Street darkened as the Fed fired off a third consecutive 75-basis point rate rise and Russian President Vladimir Putin announced a significant war escalation in Ukraine.

The ASX200 fell to a two-month low in nervous trading ahead of the public holiday for a national day of mourning for the Queen in Australia, which meant traders could not react immediately to the fallout from the Fed’s rate rise on Thursday.

Here are the top five things that happened in markets this week:

1. The Fed signals more rate hikes

As expected, the Fed delivered a 75-basis points hike, taking its funds target range to 3-3.25 per cent.

The Fed upped the ante in its war against inflation, with another 125-basis points of rate hikes signalled before the year ends.

That is more than the market expected, increasing the risk of a deeper slowdown.

2. Putin escalates war ,  sending the Euro lower

Russian President Vladimir Putin announced a significant escalation in his war in Ukraine, ordering a partial mobilisation of reservists and threatening to deploy the country’s nuclear arsenal to defend Russian territorial gains.

In response, the Euro closed at 0.9900 against the US dollar – a 20-year low.

3. Sweden’s Riksbank

Sweden’s Riksbank surprised markets this week by hiking rates 100-basis points, taking its key rate to 1.75 per cent.

The central bank opted for the more significant rate hike as Sweden’s CPI rose to 9.8 per cent year-on-year in August, up from 8 per cent in July.

4. RBA minutes point to rate hikes slowing

The minutes from the last RBA board meeting, released on Tuesday, reiterated that the RBA expects to raise interest rates further.

However, in line with the dovish tilt at the board meeting, it is considering slowing the pace of hikes into the year’s end and “will be guided by incoming data”.

5. Tesla outperforms

Over the past fortnight, shares in Tesla stood their ground despite the tech-heavy Nasdaq losing more than 7.5 per cent.

Tesla has outperformed after a solid Q2 earnings report, and after the company executed a three-for-one stock split in late August.

A stock split generally lowers the stock’s price, attracting a broader range of buyers.

The share price has also benefited from the recently approved Inflation Reduction Act in the US, which has placed more attention on the electric vehicle industry.

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All trading carries risk. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
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