Thursday 22nd March: Fed hikes rates by 25bps, Trump to announce China tariffs today

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Global Markets:

  • Asian Stock Markets : Nikkei up 0.92%, Shanghai Composite down 0.63%, Hang Seng down 0.54%, ASX down 0.22%
  • Commodities : Gold at $1330.10 (+0.65%), Silver at $16.54 (+0.71%), WTI Oil at $69.34 (-0.19%), Brent Oil at $65.11 (-0.09%)
  • Rates : US 10-year yield at 2.866, UK 10-year yield at 1.529, Germany 10-year yield at 0.587

News & Data:

  • (AUD) Unemployment Rate 5.60% vs 5.50% expected
  • (AUD) Employment Change 17.5K vs 19.8K expected
  • (NZD) Official Cash Rate 1.75% vs 1.75% expected
  • (USD) Federal Funds Rate <1.75% vs <1.75% expected
  • (USD) Crude Oil Inventories -2.6M vs 2.6M expected
  • (USD) Existing Home Sales 5.54M vs 5.41M expected
  • (USD) Current Account -128B vs -125B expected
  • (GBP) Unemployment Rate 4.30% vs 4.40% expected
  • (GBP) Public Sector Net Borrowing -0.3B vs -0.4B expected
  • (GBP) Claimant Count Change 9.2K vs -3.1K expected
  • (GBP) Average Earnings Index 3m/y 2.80% vs 2.60% expected
  • Fed Outlook: Headwinds Shift to Tailwinds, But Pace of Hikes Still Gradual
  • US tariffs have limited impact on China so far, but broad-ranging measures would

Markets Update:

Asian markets traded mixed today, following dovish takeaways from the Fed meeting. As expected, the Fed hiked interest rates by 25bps. While the median dot is still for 3 hikes in 2018, it has now push the dot to now imply three hikes in 2019, and 2 in 2020. That said the economic projections from the FOMC was more hawkish than expected. The outcomes were largely in line with expectations, and were already priced in in the markets.

Japanese equities were outperforming in a rebound from the weakness observed in the past few days – primarily due to political events. The PBoC and HKMA toed the Fed’s line on rate hikes. Investors are wary about China, given the set of trade tariffs that President Trump is expected to announce today – primarily targeting Chinese companies. However, news that China plans to open up its economy is being welcomed by the markets.

Australia had a spate of bad numbers, with unemployment growth missing expectations, and jobless rate increasing. While miners continued to outperform backed by stronger commodities, the macros were seen pulling down the ASX.

The dollar index suffered its largest fall in two months yesterday, with the yen, euro and sterling all strengthening. The HKD hit a 33 year low yesterday, amid trade war concerns. Oil prices are near the 3 year high that was hit in January, and the environment continues to favour price increases.

Upcoming Events:

  • 08:00 AM GMT – (EUR) French Flash Manufacturing PMI
  • 08:00 AM GMT – (EUR) French Flash Services PMI
  • 08:30 AM GMT – (EUR) German Flash Manufacturing PMI
  • 08:30 AM GMT – (EUR) German Flash Services PMI
  • 09:00 AM GMT – (EUR) Flash Manufacturing PMI
  • 09:00 AM GMT – (EUR) Flash Services PMI
  • 09:00 AM GMT – (EUR) German Ifo Business Climate
  • 09:30 AM GMT – (GBP) Retail Sales m/m
  • 12:00 PM GMT – (GBP) MPC Official Bank Rate Votes
  • 12:00 PM GMT – (GBP) Monetary Policy Summary
  • 12:00 PM GMT – (GBP) Official Bank Rate
  • 12:00 PM GMT – (GBP) Asset Purchase Facility
  • 12:00 PM GMT – (GBP) MPC Asset Purchase Facility Votes
  • 12:30 PM GMT – (USD) Unemployment Claims
  • 05:00 PM GMT – (GBP) MPC Member Ramsden Speaks
  • 06:45 PM GMT – (CAD) Gov Council Member Wilkins Speaks

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