Hawkish Central Banks Rock World Markets

Equity markets have been mixed around the world overnight and into this morning in the wake of yesterday afternoon’s selloff that saw US indices finish down 0.,8%-2.2%. Stocks sold off after the Fed took a “neutral hold” stance at yesterday’s meeting that was hawkish relative to investor expectations.

Between the statement and his press conference, Fed Chair Powell crushed street hopes for a March US interest rate cut indicating that while the US central bank is likely done raising interest rates for this cycle, it is not in a hurry to start cutting rates and may keep rates higher for longer until inflation is more clearly subdued. This morning, the Bank of England had a particularly contentious meeting with 2 members voting for a rate hike, 1 member voting for a rate cut, and 6 members prevailing with their votes to keep the benchmark rate unchanged.

Asia Pacific trading was mixed with the Nikkei falling 0.7% and the Hang Seng bouncing 0.5%. Similarly it’s a split market in Europe this morning with the FTSE up 0.2% and the Dax down 0.1%. US index futures are trying to rebound with gains of 0.1%-0.5% but these bounces appear small relative to yesterday’s market declines.

Currency and commodity action is also varied. The relatively hawkish Fed has the US Dollar rallying, particularly against Gold which is down 0.8%, Silver, which is down 2.1% and Bitcoin which is down 1.5%. In commodity action US Crude Oil is up 0.9%, Natural Gas is up 1.0% but Copper is down 0.9%.

Manufacturing PMI reports have been rolling out from around the world overnight. China and Australia came in just above 50 in expansion territory, Japan, the UK and European countries were all in the mid to high 40s indicating a moderate correction. Canada Manufacturing PMI (previous 45.4) is due at 9:30 am EST, followed by US ISM Manufacturing PMI at 10:00 am (street 47.0), the same time as US construction spending (street 0.5%).

Continuing an emerging trend of weakening US employment numbers that started with yesterday’s disappointing ADP payrolls, US weekly jobless claims (224K vs street 215K), were worse than expected. Tomorrow morning US nonfarm payrolls (street 180K) and average hourly earnings (street 4.1%) are due.

After the close today three more of the “Magnificent Seven” stocks report results; Apple, Meta Platforms* and Amazon.com. The response to leading companies who reported overnight and this morning has been mixed with Merck up 1.6%, Qualcomm down 2.0%, Honeywell down 2.9% and MetLife down 1.5% in premarket trading. Tomorrow morning the focus turns to Big Oil with Exxon Mobil and Chevron reporting. *Shares of Meta Platforms are held in portfolios managed by SIA Wealth Management.  

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