MARKET WRAPS

Watch For:

Housing Starts for February; Weekly Jobless Claims; Industrial Production & Capacity Utilization for February; FedEx results.

Opening Call:

Stock futures edged down, government bonds took a breather and oil prices renewed a march upward, following the first Federal Reserve interest rate hike since 2018 and promises of more to come. Continued violence in Ukraine was also in focus.

Investors largely have reacted bullishly to the Fed's long-anticipated move to raise interest rates by 25 basis points. Track the reaction in Europe to the Fed's policy tightening here .

High inflation and fears of an economic slowdown have raised the prospect that the central bank will be hiking rates aggressively, which can weigh on growth, into a downturn.

"Although I think the risks of a U.S. recession by late 2023/early 2024 are increasingly elevated I'm not convinced that the risks are particularly high in 2022," Reid said. "The start of the hiking cycle isn't historically the problem point for the economy or for that matter equities."

Read Barrons.com: The S&P 500 Could Pop in April. But Don't Be Fooled

Overseas, the pan-European Stoxx 600 rose amid continued optimism over a diplomatic resolution to end Russia's invasion of Ukraine; the index is now less than 1% below where it was before the full-scale invasion of Ukraine started.

Amid ongoing talks, officials from both Russia and Ukraine have said that details of a peace deal have made progress, though on the ground Moscow's offensive against major cities like Kyiv and Kharkiv continues.

"One can't help thinking as far as Russia is concerned, they are going through the motions, while Ukraine will insist on cast-iron security guarantees of the type Russia might find difficult to live with," said Michael Hewson, an analyst at broker CMC Markets. "Markets appear content to look past these inconsistencies and new Russian atrocities, as have oil markets."

Congressional leaders are preparing range of economic sanctions that would strip Russia and its ally Belarus of permanent normalized trade status and could even take aim at China, given U.S. warnings against that country of supporting Moscow.

Up ahead, the Bank of England, meanwhile, is expected to raise interest rates as well when it meets on Thursday.

On the economic calendar, jobless claims, building permits and housing starts for February are due, along with the Philly Fed manufacturing survey for March and later, February industrial production.

Economic Insight:

Since the onset of the war in Ukraine, Capital Economics has revised down its forecast for world GDP growth in 2022 to 3.2% from 4.0%.

Outside Russia and Ukraine, the biggest downward revisions have been to other economies in emerging Europe and to the eurozone, according to the firm.

"There is now a meaningful risk of recession there and in the U.K.," economists at Capital Economics said.

Elsewhere, the effects should be smaller, but the risks to the new forecasts are skewed to the downside, relating particularly to the threat of a renewed intensification of global supply shortages, Capital Economics said.

Stocks to Watch:

Signet Jewelers shares have tumbled more than 11% year to date, as investors sour on consumer discretionary stocks as a whole. An upbeat outlook could help reverse that trend.

Signet already provided a fourth-quarter update in January, signaling it had a robust holiday quarter. In fact, the company has had a great year, repeatedly lifting its guidance in 2021, improving its balance sheet, and beefing up its digital sales capabilities. Signet is set to report quarterly and full-year earnings for the fiscal year that ended in January.

While the at-home nature of the pandemic didn't lend itself to jewelry sales at first, consumers were quick to return to the category last year, bolstered by stimulus checks, and even with the recent decline, Signet shares are up nearly 20% in the past 12 months.

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Dollar General shares have fallen 9.9% this year as investors worry that a host of headwinds could hurt the discounter. Its fiscal fourth-quarter results, due out on Thursday, are a chance for the company to dispel those concerns.

Dollar General has been dinged by concerns about the financial health of its core low-income consumers. The ground has shifted since last year, when these shoppers were benefiting from government stimulus checks, while inflation was much lower. Today's higher gasoline prices leave people with less money to spend on other goods.

Still, as Barron's has noted in the past, Dollar General has more than 17,000 stores, located closer to more Americans who may be limiting their miles driven as gas prices rise. Sales have performed well in previous downturns.

Forex:

The dollar fell after the Federal Reraised interest rates for the first time since 2018 and signalled further rate rises, in line with what markets had already priced in and allowing for some profit-taking.

"Prospects of higher rates at home should generally be positive for the greenback, but the U.S. forward curve had already incorporated a heavy degree of tightening even before the FOMC meeting, which may slow the intensity of further USD appreciation across the board," Unicredit's research team said.

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DBS Research maintained its forecast for the USD Index to rise above 100 this year.

Bank of America sees only modest dollar tailwinds from the monetary policy-expectations channel "as the market has mostly priced in a Fed path consistent with the BofA and, now the dot plot."

BofA said the Ukraine war likely will continue to be the dominant FX driver due to risk sentiment and high commodity prices. "If risk aversion subsides, recent dollar strength is at risk of reversal, in particular vs. cyclical higher beta FX supported by recent terms of trade improvement."

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Sterling rose as the BOE is expected to raise interest rates further. The BOE is widely expected to lift its key rate by 25 basis points, although the market sees a slight possibility of a bigger 50 basis-point rise, Danske Bank analysts said.

The BOE will likely opt for a 25bp rise given elevated uncertainty over the Ukraine crisis while reiterating that more increases are needed to tame inflation, they said.

"We see a potential for a slight move higher in EUR/GBP if we are right about our call given the current market pricing."

Bonds:

The yield on the benchmark 10-year Treasury note edged down to 2.130% from 2.185% on Wednesday, reversing direction after three straight days of rises.

Selling of shorter-dated bonds, which are more heavily affected by changes in monetary policy, also eased, with the two-year yield declining to 1.934% after climbing for eight trading sessions.

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"A lot of investors suspect that the Fed won't be able to deliver as much due to reaction of markets and the economy," said James Athey, an investment manager at Abrdn. "We could think of this as peak hawkishness."

News of a peace plan between Russia and Ukraine has been improving market sentiment and could expose German Bunds to further weakness, Commerzbank's rates strategists said.

"Bund yields remain exposed as risk sentiment is improving," they said, sticking to their short bias in Bunds.

Meanwhile, new details at German Finance Minister Christian Lindner's press conference on Wednesday confirmed Commerzbank's initial assessment that the effect from the military as well as energy and climate funds will be close to zero on Bund funding in 2022, the strategists said.

Commodities:

In the commodity space, oil prices remained volatile but were holding below the key $100 a barrel mark. .

"Oil prices held steady, led by the perception of diminishing Ukraine risks and a positive meeting between the leaders of Saudi Arabia and the United Kingdom," said Jeffrey Halley, an analyst at broker Oanda. "Oil remains vulnerable to another spike lower on positive Ukraine developments."

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Gold was higher in the European session after volatile moves. Gold initially tumbled on the hawkish Fed statement and economic projections, but trimmed a good amount of losses after Fed Chair Powell signaled that the balance-sheet runoff announcement could occur as soon as May, Oanda said.

Investors don't need to look hard to find a reason to go defensive and buy gold, Oanda added, citing reasons such as lingering stagflation risks.

Read Barrons.com: Uranium Prices Are Through the Roof as the War Shifts Thinking on Nuclear Power


TODAY'S TOP HEADLINES


KKR & Co. to Buy Japan Real-Estate Manager for $2 Billion

KKR & Co. has agreed to acquire a Japanese real-estate joint venture between Mitsubishi Corp. and UBS Group AG for $2 billion, it said Thursday.

KKR said the acquisition will deepen its presence in Japan and expand its global real-estate business.


SoftBank Group Shares Rise Sharply on China Tech Rally

SoftBank Group Corp. shares rose sharply in early Thursday trade in Tokyo, helped by a rally in Chinese tech stocks following comments from top Chinese economic policy makers.

SoftBank Group shares were last 6.6% higher at 4,815 yen after rising as much as 9.8% earlier.


Hong Kong Property Shares Continue to Rally After Policy Makers' Comments

Shares of Hong Kong-listed developers continued to rally on Thursday after positive comments from top Chinese policy makers.

Leading the pack, Sunac China Holdings Ltd. surged as much as 57% and was last 48% higher at 5.80 Hong Kong dollars (74 U.S. cents). Country Garden Holdings Co. was last 22% higher at HK$5.29 after rising as much as 29% in the morning.


Canadian Pacific Railway Threatens Lockout in Labor Dispute

Canadian Pacific Railway Ltd. said it would lock out employees on March 20 if the union representing train conductors and engineers fails to negotiate a new contract or agree to binding arbitration.

(MORE TO FOLLOW) Dow Jones Newswires

03-17-22 0617ET