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US stocks extend gains on Fed’s rate-hike, Chinese stocks soar, VIX down

Federal Reseve

Asia markets are set to open higher as US stocks rebounded for the second consecutive trading day on the US Federal Reserve’s first rate hike in three years. The Fed raised interest rates by 25 basis points for the first time since 2018 and indicated a further six rate hikes this year. The committee mentioned it plans to start shrinking its balance sheet at the coming meeting but did not give details for the timeframe and size while addressing that Russia’s invasion of Ukraine causes greater uncertainty for the US economy.

Elsewhere, Chinese stock markets soared after China’s officials vowed to stabilize the financial markets that have whipsawed recently due to widening Covid-induced lockdowns and uncertainty towards geopolitical tensions. The HSI surged 9%, and the major mainland indices were all up more than 4%.

Risk-on sentiment led the last-two day’s rebound, with the CBOE Volatility Index falling below the 30-mark, to 26.67, the lowest since the Russia-Ukraine war started on 24 February.

SPI futures are indicating a 1.5% gain on the S&P/ASX 200 and the NZX 50 was up 0.86% in the first half an hour of trading.

US and EU stocks

The Dow Jones Industrial Average was up 1.55%, the S&P 500 rose 2.24%, and Nasdaq advanced 3.77%.

Growth stocks took a further ride on the Fed's decision as investors have been bracing for a gradual tightening monetary cycle, in which the Fed did not shock the markets with any unexpected aggressive tone. The Mega Cap companies' shares all finished higher, with Meta Platforms jumping 6%, and Amazon up 3.87%. The Metaverse-related stocks, such as Snap and Roblox, were both up close to 10%.

The US-listed Chinese stocks soared after the Chinese officials addressed the local financial markets, with Alibaba, Baidu, and JD.com all up more than 30%.

The bank stocks also advanced on the rising interest rates. JPMorgan Chase, Wells Fargo, Citigroup, and Goldman Sachs all advanced between 3% and 5%.

Energy stocks were down for three trading days in a row with falling oil prices.

On the data front, The US February retail sales rose 0.3%, lower than the expectation at 0.4%, indicating consumer spending was held back by high inflation.

European stocks also had a strong session on optimism about ceasefire talks and the Chinese stock rebound, with Euro Stoxx 50 up 4.05%, DAX rising 3.76%, and CAC 40 advancing 3.68%. The FTSE 100 climbed 1.62%.

Treasuries

The US government bond yields were up on the Fed’s decision. The 10-year US Treasury yield rose to 2.19%, and the 2-year Treasury yield was up to 1.94%. The spread between 10-year and 2-year yields tipped up from the recent low, indicating an improving outlook of the economy, however, remains at a concerning level.

The EU bond yields were also up. German 10-year Bond Yield was slightly up to 0.39%, and the France 10-year Bond Yield was flat at 0.84%. The UK 10-year Gilt yield rose to 1.63%.

Commodities

Crude oil prices continue falling amid Ukraine-Russia ceasefire talks, reducing supply concerns, and there was a jump in the US weekly oil inventories.

The WTI futures fell 1.5%, to US$95.04 per barrel. Brent crude futures slid 1.78%, to US$98.13 per barrel.

The rising bond yields and fading safe-haven demand sent gold futures down further, dropping US$3.6, to US$1,926.1 per ounce after briefly hitting the intraday low at US$1,894.

Currencies

USD weakened against most of the other major currencies as the Fed’s comments on monetary policy were somewhat more dovish than expected. Both AUD and NZD firmed against the greenback by more than 1%. Eurodollar and Pound strengthened 0.77% and 0.85% against the USD. Japanese Yen, however, continues to weaken.

Cryptocurrencies

The cryptocurrencies jumped along with the other risk assets. The leading digital tokens rose for a third session, with Bitcoin up 5%, to above US$41,000, and Ethereum climbing 6.4%, to above US$2,700 in the past 24 hours.

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