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Markets Update: Markets cautious after hawkish FOMC; ASX 200 and Nikkei 225 lower, Hang Seng and Shanghai Comp decline; Brazil Central Bank cuts rates, signals further easing
Economic Calendar
Global Markets Roundup: 21 Sep 2023
The Fed kept rates unchanged on Wednesday, but its hawkish dot plots and signals of a further rate hike this year and fewer cuts next year pressured APAC stocks and US futures.
European equity futures are also pointing to a lower open, with the Euro Stoxx 50 future down 1.0% after the cash market closed up 0.8% yesterday. The US dollar index (DXY) has held onto its post-FOMC gains, while USD/JPY has advanced as high as 148.45. The antipodeans are lagging their peers. The Brazil Central Bank cut the Selic rate by 50bps to 12.75%, as expected, and anticipates further reductions of the same magnitude in the next meetings.
The ASX 200 was lower on Thursday, with the top-weighted financial industry leading the broad declines. The Nikkei 225 retreated below the 33,000 level as Japanese yields climbed to decade highs and with the Bank of Japan (BoJ) kickstarting its two-day policy meeting. The Hang Seng and Shanghai Composite also declined alongside the downbeat mood across regional peers. The losses in the mainland were initially cushioned following the Chinese Cabinet's pledge to speed up the development of the advanced manufacturing sector and amid resilience in developers after Guangzhou adjusted purchase rules for several districts.
The US dollar index (DXY) held on to its post-FOMC gains on Thursday, benefiting from the Fed's signal that interest rates will remain higher for longer.
The euro (EUR/USD) was pressured by the firmer dollar and retreated further beneath the 1.0700 handle.
The pound (GBP/USD) remained subdued after the prior day's softer-than-expected CPI data shifted money market pricing towards a coin-flip between a hike and a pause at today's BoE meeting.
The US dollar against the Japanese yen (USD/JPY) took a breather after it reclaimed the 148.00 handle in the aftermath of the Fed meeting, which spurred another bout of the familiar currency jawboning from Chief Cabinet Secretary Matsuno. The antipodeans (AUD and NZD) were dragged lower alongside the negative sentiment and downside in commodity prices, while better-than-expected New Zealand GDP failed to inspire the domestic currency.
The Brazil Central Bank cut the Selic rate by 50bps to 12.75% on Thursday, as expected. The committee members unanimously anticipate further reductions of the same magnitude in the next meetings, and the pace of rate cuts is appropriate to keep monetary policy contractionary for the process of disinflation. The total magnitude of the easing cycle will depend on inflation dynamics, expectations and projections, output gap and balance of risks.
Bond markets slump as yields rise
10-year US Treasury (UST) futures continued to slump on Thursday, as yields extended higher across the curve, including the US 2-year yield, which climbed to a fresh 17-year high in the aftermath of the Fed's hawkish pause.
Bund futures prodded yesterday's lows and retreated further away from resistance near 130.00.
10-year Japanese government bond (JGB) futures were dragged lower amid spillover selling and after the 10-year JGB yield touched its highest in a decade. The latest enhanced-liquidity auction in the long-end saw weaker demand.
Commodities remain under pressure
Crude futures remained on the back foot on Thursday amid the negative risk tone and firmer dollar.
Saudi Crown Prince MBS said that oil output cuts are purely based on supply and demand to the market when asked about criticism that oil output cuts help Russia.
Iran's oil exports have increased as the US has backed away from some sanctions enforcement, according to the Wall Street Journal.
An Australian industrial arbitrator said Chevron (CVX) and unions are on the precipice of achieving the first enterprise agreements for LNG facilities. Discussions have resulted in widespread agreement on the majority of provisions of proposals. The arbitrator made recommendations on pay and working conditions for Chevron and unions to consider, but noted that a failure to settle all outstanding issues would result in the agreed provisions simply evaporating. Parties are required to advise the commission of their acceptance or rejection of recommendations by 09:00 Sydney time on Friday.
UK PM Sunak said they will not ban new oil and gas in the North Sea and will bring forward reforms for energy infrastructure.
Natural Gas Pipeline Co. declared a force majeure on the M&M line near compressor station 158 located in Dewey County, Oklahoma.
Spot gold was lacklustre on Thursday after recent selling and as the dollar held on to Fed-induced gains.
Copper futures remained pressured alongside the negative mood across risk assets.
Russia is mulling an additional tax on exports for some commodities including metals, according to sources cited by Reuters.
Looking ahead, the key events to watch on Thursday include the US IJC, Existing Home Sales, and EZ Consumer Confidence (Flash), as well as policy announcements from the BoE, SNB, Riksbank, Norges Bank, CBRT, and SARB. ECB President Lagarde, ECB board member Schnabel, and Riksbank board member Thedeen are also scheduled to speak. There is also supply from Spain, France, and the US.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team