There are two major problems which continue to dominate the headlines. One of them is the drone attacks on the oil processing plant in Abqaiq. The second one is the meeting of the U.S. Federal Reserve. Both of them not only affected the stocks around the world but will continue to influence the stock markets for the next several days.
The chance of military conflict increased as a result of this incident. Both sides should work hard to avoid direct military confrontation. Let’s not forget that the global economy is slowing down and there is no need for additional problems. The ongoing trade war between the U.S. and China is a huge problem which already caused economic problems. In this situation, regional tensions between Iran and Saudi Arabia will further complicate the situation.
The U.S. Federal Reserve will announce its decision regarding the interest rates in several hours. However, another interesting fact took place on Tuesday. The Federal Reserve carried out the first overnight repurchase auction for the first time in a decade. The purpose was to lower the federal funds rate from 9% to 2-2.25%. Bank bough repos worth $53 billion.
The New York Federal Reserve also made a similar decision when it bought securities worth $75 billion from the Wall Street dealers. This is a temporary decision.
According to the analysts, the U.S Federal Reserve will lower the interest rates by 0.25%. Nevertheless, still won’t be enough to satisfy President Donald Trump. He insists that interest rates should be even lower. It is even better if this number is going to be negative. However, it is unlikely that the rate-setting committee will reduce the interest rates to that level.
U.S. stocks on Wednesday
The U.S. stock indexes reacted to the news that Federal Reserve may reduce interest rates. The Dow Jones Industrial Average fell by 33 points or 0.1% to 27,088. The S&P 500 index decreased by 28 points or 0.1% to 3,002 points. The NASDAQ fell by 11.6 points to 8,174 points.