MARKET WRAPS
Watch For:
EU Flash Consumer Confidence Indicator; U.K. CPI, PPI; trading updates from Prudential, Investec
Opening Call:
European stock futures were lower despite a positive lead from Asian stock benchmarks ahead of the Federal Reserve's policy meeting outcome. The dollar gained; Treasury yields were little changed; oil futures fell while gold advanced.
Equities:
Stock futures were tracking lower early Wednesday as markets brace for the Federal Reserve's meeting outcome.
The central bank is widely expected to hold interest rates steady and investors will instead focus on its latest interest-rate and economic projections.
Earlier this month, Powell told lawmakers the central bank was "not far" from being able to cut interest rates.
"The question is does he do a detour from that statement," said Quincy Krosby, chief global strategist for LPL Financial. "The market's move higher on the days we do move higher is predicated on the idea that the Fed will cut rates."
Forex:
The Fed's dot plot is expected to be a major focus, as markets are now pricing in around 72bps worth of rate cuts by end-2024, which is slightly less than the three cuts that the dot plot released in December had guided for, Maybank analysts said.
Should the Fed's guidance be largely unchanged at three rate cuts, USD could weaken, they add.
A persistently weaker dollar would leave the U.S. more prone to a stagflation-like scenario with tepid growth and stubborn inflation - the opposite of the "goldilocks" scenario that has helped bolster U.S. equities over the past year, said Morgan Stanley Wealth Management Chief Investment Officer Lisa Shalett.
And signs that this "regime shift" is already underway have multiplied recently with the Bank of Japan's decision late Monday to raise interest rates one such development.
Bonds:
Rates on U.S. government debt fell by the most in about two weeks on Tuesday as attention turned to the Fed's upcoming policy announcement.
Investors still expect lower bond yields but investors aren't quite as convinced on this as they were, Bank of America's March monthly global fund manager survey finds.
This month, 40% of FMS investors expected lower bond yields, down from 62% in December 2023, it said.
Energy:
Oil futures fell slightly as traders weighed potential changes to global supply and demand and focused on the Fed's decision.
"Oil's upside could be capped by perceived delays to Fed rate cuts past June," as well as still elevated U.S. crude output, and any further stutters to China's economic recovery, said Han Tan, chief market analyst at Exinity.
Oil bulls could be "given another shot in the arm if the Fed does stick with projections for three 25-basis point rate cuts this year, which should in turn shore up U.S. demand for oil [while] softening the dollar, " he said.
However, oil benchmarks "may be prompted to unwind some of its recent gains if the Fed's 'higher-for-longer' narrative [for interest rates] takes stronger hold of global financial markets," he added.
Metals:
Gold gained amid focus on the Fed decision, as traders weigh the timing of potential rate cuts, which can influence prices of the non-interest-bearing metal.
The central bank is likely to keep rates unchanged and make no major adjustments to its macroeconomic projections, ANZ Research analysts say in a research report.
Any changes will likely reflect tweaks instead of a "meaningful misalignment" of forecasts compared with outcomes, they added.
--
Copper fell extending overnight losses after a stronger U.S. dollar prompted a correction and sell-off, the ANZ Research team said.
As a result, the market appears to have ignored relatively positive data with U.S. new home construction bouncing back strongly for February, they said.
--
Iron ore prices rose extending gains on China's better-than-expected activity data earlier in the week, Westpac analysts said.
The Chinese data have continued to buoy sentiment among traders, as ANZ Research analysts note that industrial output rose in January-February.
TODAY'S TOP HEADLINES
China's Benchmark Lending Rates Held Steady
China's benchmark lending rates were kept steady after the central bank held its key policy rates unchanged this month, official data showed Wednesday.
The one-year loan prime rate was steady at 3.45%, while the five-year LPR was the same as the last release at 3.95%, according to the People's Bank of China. The longer-term benchmark was lowered by the largest amount on record last month.
The Bank of Japan Just Handicapped a Winning Strategy. What to Know About the Yen Carry Trade.
The Bank of Japan's decision to raise interest rates for the first time in 17 years could have a big impact on a popular way for investment bankers to make money.
It's called a carry trade. Here's a basic rundown.
Fed is 'so far from equilibrium' as markets await rate guidance, BlackRock's Rick Rieder says
Investors have been re-evaluating when the Federal Reserve may start lowering interest rates, as the "last mile" of bringing down inflation is proving difficult, according to BlackRock's Rick Rieder.
With the central bank's two-day policy meeting under way, some Fed officials may be wary about cutting rates due to signs of stickier inflation in the services sector of the U.S. economy, Rieder, who is chief investment officer of global fixed income and head of the global allocation investment team at BlackRock, the world's largest asset manager, said by phone.
Kering Expects Revenue Drop on Lower Gucci Sales
Gucci owner Kering said it expects a decline in revenue for its first quarter, following the company's profit warning as sales continue to slow.
The French luxury giant said Tuesday that it expects a revenue decline of about 10% from last year's first quarter, when group revenue was 5.01 billion euros ($5.45 billion), due to a steep sales drop at Gucci in the Asia-Pacific region.
Europeans at Odds Over Sanctioning Iran for Weapons Transfers in Middle East
The European Union is pushing back against a French-German drive to target Iran with sanctions over its provision of missiles and other military hardware to its regional allies, with senior EU officials saying new sanctions could undercut diplomacy with Tehran.
France, Germany, the Netherlands and five other EU countries wrote last month to EU foreign-policy chief Josep Borrell, saying the bloc should adopt a sanctions regime that allows them to target "Iranian actors which arm, fund, advise and instruct" pro-Iran regional militias, as well as the groups themselves, according to a letter seen by The Wall Street Journal.
Apple Looks to External Partners to Boost AI Efforts
Apple is looking to outside companies to help its artificial intelligence efforts.
Apple has held discussions with Google and other AI software providers about using their technology to power the iPhone maker's mobile features, said people familiar with the matter. The tech giant has talked to startups including Cohere and OpenAI as part of the discussions, some of the people said.
Write to singaporeeditors@dowjones.com
Expected Major Events for Wednesday
05:30/NED: Mar Consumer confidence survey
07:00/GER: Feb PPI
07:00/UK: Feb UK producer prices
07:00/UK: Feb CPI
07:00/DEN: Mar Consumer expectations
09:00/ITA: Jan Industrial Production
09:00/POL: Feb Average gross wages
09:00/POL: Feb Industrial Production Index
09:00/POL: Feb PPI
09:00/ICE: Feb Harmonized CPI
09:30/UK: Jan UK House Price Index
10:00/LUX: Feb Unemployment
10:00/EU: Jan Construction output
10:00/BEL: Mar Consumer Confidence Survey
11:00/UK: Feb Aluminium Production report
13:30/CZE: Czech interest rate decision
15:00/EU: Mar FCCI Flash Consumer Confidence Indicator
17:59/POR: Dec ICSG Copper Report
All times in GMT. Powered by Onclusive and Dow Jones.
Write to us at newsletters@dowjones.com
We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
03-20-24 0115ET
