Stock market driven by interest rate, financial aid is harder in ending than starting

Since central banks in the world have been rushing to cut their interest rates and bring quantitative easing, the trend in such as stock markets is being driven by monetary policy.

In typical scenario, the stock market soars after the interest rate has been cut or quantitative easing has been taken. While this is under the recovery process, counter effect is likely to be caused in the ending process. The counter effect implies stock market vulnerable to rate hike or quantitative easing finished.
In fact, we have seen some examples of the counter effect in US. The market sometimes reacts negatively when released economic indicators are too good as outstanding recovery is thought to lead interest rate hike and current liquidity can be degraded.

Pick up from CNBC >>
"Good news is bad news again," said Gina Martin Adams at Wells Fargo. Adams said there was a quick jump in the Fed Funds futures this morning. "The percentage chance for a June hike went from 18 percent to 25 percent," she said.

February's nonfarm jobs report showed a gain of 295,000, above expectations of 240,000 in February, down from 257,000 in January. The unemployment rate fell to 5.5 percent, while hourly wages ticked up 0.1 percent, below consensus and off the surprise 0.5 percent gain in January.

Today, Bank of England kept the interest rate unchanged at 0.50%. UK economy has recovered, following to US economy. The market is paying attention to when the interest rate is going up and the ending process of financial aid is likely as tough as US.

Ref.
CNBC - US stocks fall sharply on fears of pending rate hikes; Dow below 18K
FT - Bank of England keeps rates and monetary policy on hold


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