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Federal Reserve Rate Hike Expectations Fuel Equity Markets and U.S. Treasury Yields

Market Update - Daniel Ang The Accidental Trader Traders Academy International 12

Ahead of the anticipated interest rate hike by the Federal Reserve, equity markets showed slight gains and U.S. Treasury yields climbed. In the midst of this, high-profile companies, namely Alphabet and Microsoft, posted quarterly results that exceeded market expectations, providing a further boost after the market closed.

Fed officials convened yesterday for their July monetary policy meeting. The prospect of further rate tightening by the Fed is at the forefront of the agenda. The consensus amongst market players points to a probable 25 basis-point rate increase at the conclusion of the meeting, scheduled for 2:00 AM Singapore time.

U.S. Treasury yields advanced, with the 10-year notes hitting 3.890%, and the rate-sensitive two-year notes reaching 4.8806%.

Leading indices mirrored this upward trend. The Dow Jones Industrial Average recorded a modest 0.08% growth to reach 35,438.07. The S&P 500 experienced a more substantial climb of 0.28%, ending at 4,567.46. The Nasdaq Composite outperformed both, adding 0.61% to finish at 14,144.56.

Despite these gains, the U.S. Dollar faltered, surrendering earlier session gains ahead of the Federal Open Market Committee (FOMC) meeting. The currency market is also attuned to the upcoming rate decisions from the European Central Bank (ECB) and the Bank of Japan (BoJ). As a result, the Dollar Index declined by 0.128%, with the EUR/USD dipping 0.1% to reach 1.1051.

Crude oil prices scaled three-month highs, driven by indications of tightening supplies and supportive declarations from Chinese authorities. Brent futures closed 1% up at $83.64 a barrel, after touching a daily peak of $83.87, unseen since April 19. U.S. West Texas Intermediate (WTI) crude also gained 1%, settling at $79.63 per barrel.

In the precious metals market, gold prices edged up, with spot gold seeing a 0.5% increase to reach $1,964.34 per ounce, while COMEX gold futures eked out a 0.07% gain to hit $1,961.70 per ounce.

Major digital assets exhibited mixed performance amidst limited trading volumes on Tuesday. Bitcoin (BTC/USD) maintained its position above the $29,000 mark, with a price of $29,220, representing a 0.4% uptick over the past 24 hours. The price fluctuated between $29,062 and $29,353 throughout the day. Ethereum (ETH/USD) displayed a modest 0.5% rise to settle at $1,860.

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