European stock indices are declining as investors prepare for the European Central Bank's (ECB) decision on interest rates. US stock index futures are falling as well after yesterday's Federal Reserve rate hike of a quarter-point, with ongoing issues at American banks adding additional pressure on stock indices.
European stock indices are declining as investors prepare for the European Central Bank's (ECB) decision on interest rates. US stock index futures are falling as well after yesterday's Federal Reserve rate hike of a quarter-point, with ongoing issues at American banks adding additional pressure on stock indices.
Financial stability risks have increased following the Fed's interest rate hike yesterday, prompting traders and investors to get rid of the shares of US regional banks. The future of PacWest Bancorp is now uncertain as its shares plummeted by 54% after news emerged that the bank is exploring strategic options to exit the crisis, including a sale or raising capital from investors.
The majority of industry groups in Europe are also trading in the red, with the energy sector being the only winner after Shell Plc reported high quarterly profits and maintained its share buyback pace.
Today, the ECB is expected to slow down the pace of rate hikes after its preferred inflation gauge declined for the first time in 10 months. However, there is considerable debate on this issue, and it is difficult to predict the actual decision that the European regulator will make. A more aggressive policy will push stock indices downward.
Tightening lending conditions will exert significant downward pressure on the eurozone economy, forcing policymakers to transition to a less restrictive policy sooner than suggested. Yesterday, the US market slumped after Fed Chair Jerome Powell downplayed the prospects for rate cuts, while treasury bond yields fell.
Oil prices saw a slight increase, recovering from a sudden drop in early morning trading, although demand remains relatively subdued. The Asian index rose, driven by gains in Hong Kong shares, while mainland China stocks resumed trading after a three-day break.
As for the technical outlook for the S&P 500, pressure is rising alongside exacerbated banking crisis. Bulls need to do their best to stay at the level of $4,065 and return to $4,091 from where they can head for the next targets of $4,116 and $4,184. Another priority for the buyers will be to maintain control of $4,208 to intensify the bullish trend. In case of a decline amid the prospect of a further rate hike and a possible recession, bulls will have to assert their strength at $4,064. Its breakout will push the price back to $4,038 and will pave the way to the target at $4,010.