US equities rose to fresh all-time highs on Wednesday as the Federal Reserve signalled its on track to cut rates later this year.
United States
Fed officials left interest rates unchanged as expected, while maintaining their view of three rate cuts this year. In a press conference, Jerome Powell reiterated officials want to see more evidence that prices are coming down, noting it would be appropriate to start easing at some point this year. The Fed also decided to slow the pace of reducing its balance sheet, with Powell noting it “allows us to approach that ultimate level more gradually”. Finally, the accompanying Fed dot plots showed ten officials see three or more cuts this year, while nine anticipated two or fewer.
Fed Dots Plots
The S&P500 climbed 0.65% with most sectors higher and 75% of closing upwards. The Dow Jones also gained 1.03% along with Nasdaq Composite 1.25% and Russell 2000 1.75%. Bond yields declined with the 2-year down –7.2 basis points to 4.611% along with the 10-year down -1.6 basis points to 4.277%. Based on Fed Fund futures the probability of a June rate cut rose to 69% up from 57% before the meeting.
Europe
European stocks were muted, with the cash trading session closing before the Fed meeting which contributed to higher US markets. The Euro Stoxx 600 was unchanged along with the FTSE100, the DAX edged up 0.15%, while the CAC slipped -0.48%. In economic data, the latest reading of consumer confidence for the Eurozone in March was in line with expectations at -14.9 compared to -15.5 previously. Elsewhere, UK inflation was slightly below expectations, with core inflation rising 4.5% vs 4.6% forecast, while headline inflation rose 3.4% also below the 3.5% expected.
Australia
The ASX is expected to open higher today, with ASX200 futures up 49 points or 0.63% to 7,799. The index finished -0.1% lower on Wednesday, as investors awaited the Fed policy decision overnight. In focus for investors today are the latest round of PMI reports for March at 9 am AEDT followed by unemployment data for February at 11:30 am AEDT. Expectations are for 40k jobs to have been added over the month and see a modest decline in the unemployment rate to 4% from 4.1% previously.
Commodities
Oil prices slipped overnight with both WTI and Brent crude -1.52% and -1.38% lower respectively. The moves come despite a larger than expected draw in crude of -1.952m barrels vs expectations of a 13k barrel gain. Gasoline inventories also dropped, down -3.31m barrels vs -1.35m forecast. Iron ore futures were -0.86% lower on Wednesday although have rebounded 0.55% this morning to US$106.30 and copper rose 0.47%. Gold climbed 1.35%, boosted by a weaker USD and Treasury yields, silver climbed 2.47% along with Bitcoin 4.27%.
Economic Calendar
21st March 2024
New Zealand GDP (QoQ Q4) 08:45
Australian PMI (MoM Mar) 09:00
Australian Employment (MoM Feb) 11:30
Eurozone PMI (MoM Mar) 20:00
BOE Rate Decision 23:00
US PMI (MoM Mar) 00:45
US Leading Index (MoM Feb) 01:00
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.
