Equity markets digesting higher interest rates

📉Equity markets digesting higher interest rates🤑

In a turbulent week, North American stocks all ended lower as a result of a 0.75% rate hike from the US central banks, which is on pace to increase policy rates to 3.5% by yearend to tame the hottest inflation in 40 years and bring it back to the 2% target. US S&P 500 and tech-heavy Nasdaq lost 5.79% and 4.78% this week.

 

The US markets are technically in a bear market, with S&P 500 falling 20% off its January all-time highs. While S&P 500 rose on Friday, it closed at the lowest level since December 2020 as the markets are embracing a US recession. Central banks worldwide are tightening their monetary policy to combat inflation, with Swiss and UK central banks adding to their policy interest rates this week and shrinking their balance sheets which drain liquidity in financial markets and pressure risky assets.

 

Canada’s S&P/TSX composite lost 6.63% this week as oil prices came off their recent highs and the Canadian dollar depreciated against the US dollar. West Texas Intermediate oil price fell 6.4% on Friday to stand at 110 a barrel, and the US dollar appreciated against other major currencies, standing at 1.30 against the Canadian dollar.