Equities were mixed on Wednesday after comments from Fed Chair Jerome Powell eased concerns the Fed may need to raise interest rates further.
United States
The Fed left interest rates on hold on Wednesday as widely expected, although indicated that it was likely to need to keep interest rates higher for longer, rather than further increases. Speaking on Wednesday, Powell noted “So far this year, the data have not given us that greater confidence in particular” that rate cuts are appropriate… Readings on inflation have come in above expectations. It is likely that gaining such greater confidence will take longer than previously expected.”
Treasury yields declined, signalling investors viewed these comments as less hawkish than feared. The 2-year rate declined -7.1 basis points along with the 10 and 30-year rates by -4.7 and -3.5 basis points respectively. The S&P500 was -0.34% lower along with the Nasdaq Composite -0.33% while the Dow Jones and Russell 2000 rose 0.23% and 0.32%. In economic data overnight, the latest ISM manufacturing PMI for April was weaker than expected at 49.2 vs 50 forecast, slipping into contractionary territory.
Europe
European stocks dropped on Wednesday following losses on Wall Street on Tuesday, with investors seemingly focused on higher US wage inflation. The Euro Stoxx 600 edged -0.11% while the DAX dropped -1.03% along with the CAC -0.99% and FTSE100 -0.28%.
Australia
The ASX is expected to edge lower this morning with ASX200 futures down -10 points or -0.13% to 7,567. The index slumped -1.23% on Wednesday following heavy losses from Wall Street, with all sectors lower and 90% of stocks down for the session. Energy was the worst-performing sector, down -1.97% following lower oil prices, with Woodside and Santos both declining over -2%.
Commodities
Oil prices are lower overnight, with both WTI and Brent crude -3.36% and -3.16% weaker respectively. The losses follow the latest crude oil inventories for April 26th which show a significant unexpected increase of 7.265m barrels vs -2.3m forecast. Iron ore futures in Singapore slipped -0.49% on Wednesday and are slightly higher by 0.08% this morning, with copper 0.21% higher. Gold climbed 1.47% to US$2,319 an oz, silver also gained 1.48% while Bitcoin slumped -4.12%.
Economic Calendar
Australian Balance of Trade (MoM Mar) 11:30
Eurozone Manufacturing PMI (MoM Apr) 18:00
Initial Jobless Claims (Apr 27th) 22:30
Fed Rate Decision 04:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
