- The Nasdaq 100 went up by 0.21%, while the DJIA climbed by 1.45%. The S&P 500 was slightly up by 0.61%. During the recent meeting of the Federal Open Market Committee (FOMC), the Federal Reserve decided to reduce the expected number of interest rate cuts for 2024. Initially, they intended to implement three rate cuts, but now they are only planning to implement one. The yield curve, which shows the difference between short-term and long-term interest rates, is expected to remain inverted until the Federal Reserve implements significant interest rate cuts.
- The STOXX Europe 600 Index slightly increased by 0.79%. Business ctivity in the eurozone unexpectedly slowed down in June. This was due to a loss of momentum in the services sector and a sharper contraction in manufacturing, as shown by surveys conducted among purchasing managers. The HCOB Composite Purchasing Managers' Index (PMI), which combines manufacturing and services activity, dropped from 52.2 in May to 50.8 in June, according to early data collected by S&P Global.
- The CSI300 Index went down by 1.30%. Chinese banks kept their one and five-year loan prime rates steady at 3.45% and 3.95% respectively, as predicted. The People's Bank of China injected RMB 182 billion into the banking system through its medium-term lending facility, maintaining the lending rate at 2.5%. Due to RMB 237 billion in loans expiring this month, there was a net removal of RMB 55 billion from the banking system. However, the central bank provided additional funding by injecting RMB 4 billion in short-term loans.
Over the last decade, the US debt has doubled, reaching almost $35 trillion, while annual interest payments soared to $1 trillion.
The increase in interest payments by the U.S. government is not solely due to rising interest rates but also to the growing debt issued.
This surge in debt repayment reduces funds available for defense, social programs, research, and other key government functions. Therefore, it may hinder economic growth, diminish business investments, elevate future inflation expectations, and undermine global confidence in the US dollar.
Addressing the issue will require political measures to ensure proper management of the debt, as a decrease in the Fed funds rate alone would not solve the problem.
