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US stocks rally as risk-on returns ahead of the Fed rate decision

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Wall Street extends gains one day ahead of the Fed rate decision as investors bet for a dovish turn of the central bank. Markets are pricing for a 25 basis-point rate hike by the Fed, bringing the interest rate to 5%. And it is most likely to reassure investors with the ability to stabilize the banking system amid the recent market turmoil. While US bond yields swung widely higher, the US dollar weakened against the Eurodollar and the Swiss Franc but strengthened against Asian currencies. Bank and energy stocks sharply rebound in Europe, pushing the regional markets higher. Following the ECB and SNB’s pledges to support the banking system, investors expect a similar tone from the US Fed.

In commodities, risk-on trades sent haven assets down, with gold prices plunging 2%, while crude oil jumped as recession fears eased.

Asian stock markets are set to open higher, with the ASX futures up 0.89%, the Hang Seng Index futures rising 0.73%, and Nikkei 225 futures advancing 1.65%.

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  • 8 out of 11 sectors in the S&P 500 finished higher, with energy stocks leading gains, up 3.47%. The financial sector rebounded further, up 2.55%. The growth sectors, including consumer discretionary and communication services, ended strongly, led by Tesla’s shares.
  • Google grants the public access to its chatbot tool, Bard, competing with Microsoft’s OpenAI-supported ChatGPT. CEO Sundar Pichai told employees that the success of the chatbot would be on public testing. Google’ s parent, Alphabet’s shares, rose 3.6%, while Microsoft’s shares were up 0.6% on Tuesday amid a broad tech rally.
  • Gold futures sharply retreated 2% amid risk-on sentiment, a jump in the US bond yields. The precious metal’s price rose 10% during the banking rout as being seen as a haven asset. The retreat may be only a short-term correction, with technical support at the 50-day moving average of around 1,880.
  • Crude oil prices were up for the second straight trading day as investors’ worries about banks eased, while traders are awaiting the US crude inventory data, expecting the oil stockpile to fall due to an improvement in refineries’ operations.  

Today’s agenda:

  • No influential economic data is to be released for the APAC region today. The newly reported New Zealand Westpac consumer sentiment for the first quarter rose slightly to 77.7 from 75.6 in the prior quarter, but it still stayed at an extremely low level.

ASX and NZX announcements/news:

  • The New Zealand-founded sports clothing company KMD Brands Limited reported strong half-year earnings. The net profit surged 352% to $NZ14 million from a year ago and declared a dividend of NZ 3 cents. Net sales jumped 34.5% to $NZ548 million.   
  • Perth Mint chairman admitted “historical issues” at the West Australian institution and strengthened its governance regarding concerns over money laundering and purity of its gold bars.  

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