US stocks ran off session highs and finished lower following the Fed’s 25 basis point rate hike, bringing the benchmark rate to 4.75%-5%. While the move was widely expected, Fed Chair Powell indicated the committee considered pausing rate hikes amid the recent banking turmoil. The rhetoric sparked concerns about the banking conditions and a likely economic recession, sending broad markets down. The US dollar tumbled against major currencies, and the haven assets, such as gold, bonds, the Eurodollar, and the Japanese Yen, jumped.
The key takeaways from today's Fed meeting: 1. The Fed dot plot projects one more rate hike for 2023, and the terminal rate will be at 5.1%, unchanged from the December meeting. 2. The recent banking turmoil is “likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation.” 3. FOMC continues the balance sheet unwinding by a cap of $95 billion monthly.
The US economic gloom and geopolitical tensions between US and China have become primary concerns of Wall Street. Following the Fed’s decision, the BOE and SNB’s policy meeting will be in the spotlight later today.
Asian stock markets are set to open mixed, with the ASX futures down 0.74%, the Hang Seng Index futures rising 0.82%, and Nikkei 225 futures sliding 0.26%.
- All 11 sectors in the S&P 500 closed in the red, with the real estate sector leading losses down 3.64%. Financials and energy were also the laggards, both slumping more than 2%. Major tech shares all finished lower, down between 1-3%.
- UK inflation unexpectedly rose to 10. 4% in February after a three-month decline as food and energy prices continued to elevate. The data was much higher than the consensus of 9.9%, a jump from 10.1% in the prior month. The Bank of England is set to raise the interest rate by 25 bps, but sticky inflation may pressure the bank for the future policy path.
- The Eurodollar rose to an 8-week high amid the slump in the US dollar as traders shifted funds to haven currencies. The ECB raised the interest rate by 50 bps last week and vowed to stabilize the banking system with sufficient liquidity.
- Gold futures soared on a softened US dollar, a decline in the US bonds. Gold prices may continue to fly amid the economic concerns and softening tone in rate hikes from the Fed.
- Crude futures WTI rose for the third straight trading day to above $70 after hitting a 15-month low, thanks to the weakness in the US dollar. The larger-than-expected build in the US crude inventory capped gains. The US oil inventories rose 1.1 million barrels from the previous week, more than an estimated 1.56 million draw, suggesting demands are tempered.
- Bitcoin pulled back from a fresh 9-month high of nearly 29,000 following the selloff on Wall Street as Fed’s rhetoric on credit conditions sent jitters to risk assets.
- No influential economic data is to be released for the APAC region today.
- BOE policy meeting, with a 25-bps rate hike expected.
- SNB policy meeting, with a 50-bps rate hike expected.
ASX and NZX announcements/news:
- Brickwords posts a record adjusted net profit of $410 million, and sales revenue is up 13% to A$548 million for the six months to 31 January. The company lifted its dividend by 5% to A 23 cents on an earning per share of A$2.69, up 24% annually.