MARKET WRAPS
Watch For:
EU CPI; UK PPI, CPI; trading updates from Volvo, ASML, Just Eat Takeaway.com, Antofagasta
Opening Call:
Shares are poised to recover some of their losses in Europe opening trade on Wednesday. In Asia, stock benchmarks were mostly lower; Treasury yields were barely changed; the dollar was mixed; while oil fell and gold was steady.
Equities:
European shares are set to claw back some lost ground at the open on Wednesday, as the market parses U.S. Federal Reserve Chair Jerome Powell's remarks overnight.
Powell suggested the Fed would likely need to wait longer to cut interest rates than it had previously anticipated.
Some analysts noted that Powell's comments didn't come as a surprise, mostly confirming what investors had already concluded after last week's economic data.
The good news for investors was that Powell didn't seem at all interested in raising interest rates, a scenario that analysts have deemed unlikely but had started to treat a little more seriously, CreditSights said.
Forex:
The dollar was mixed in Asia, but may be lifted by higher Treasury yields, which would boost the allure of U.S. fixed-income assets and demand for the greenback.
Fed Chair Powell said overnight that it is "likely to take longer than expected" to achieve the level of confidence needed to cut rates following recent stronger-than-expected U.S. inflation readings, said CBA.
Expectations of higher-for-longer U.S. rates are expected to keep the dollar supported in the near term, CBA added.
Bonds:
Treasury yields were flat in Asia after previous gains, as U.S. March industrial production met expectations and Fed's Powell said it may take longer than expected to cut interest rates.
Separately, the International Monetary Fund projected faster economic growth for the U.S. this year, bolstering the outlook for the global economy.
Odds that the Fed will keep rates at current levels three meetings from now, in July, rise on the CME's FedWatch to 54% from 25% a week ago, right before the March CPI surprise.
Energy:
Oil lost previous gains, as traders awaited Israel's response to Iran's recent attack.
"Oil traders are hunkering down as bears are increasingly afraid to bet on lower prices," Price Futures Group said. At the same time, "bulls are pulling in their horns until they get clarity on what the Israeli response may be."
For now, the oil market is on edge over whether to "leap or break on the next headline - until then it's an uneasy calm," it said.
Metals:
Gold was steady in Asia, as inflation concerns contend with safe-haven demand spurred by Middle East tensions.
Fed's Powell damped hopes of rate cuts in remarks made on Tuesday. This, together with a stronger U.S. dollar, have curbed demand for gold, the ANZ Research team said.
However, haven demand remains strong due to rising tensions in the Middle East, the team added.
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Copper was flat, as a stronger dollar weighs on investor appetite, ANZ said.
Copper traders are also contemplating the impact of the latest U.S. and U.K. sanctions on Russian metals imports, ANZ said. U.K. rules limiting citizens from trading Russian metals have already led to a buildup in inventories in warehouses.
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Iron ore prices were higher, tracking rallies in gold and other metals, Nanhua Futures said.
Lower inventories of iron ore may also be supporting prices, it said. However, weak demand from China remains a concern.
China's import growth has slowed partly due to lower import of energy materials and the sluggish property sector, HSBC Research said, adding that the lack of effective measures to boost property demand may further weigh on iron ore demand.
TODAY'S TOP HEADLINES
Powell Dials Back Expectations on Rate Cuts
Firm inflation during the first quarter has called into question whether the Federal Reserve will be able to lower interest rates this year without signs of an unexpected economic slowdown, Chair Jerome Powell said Tuesday.
His remarks indicated a clear shift in the Fed's outlook following a third consecutive month of stronger-than-anticipated inflation readings, which derailed hopes that the central bank might be able to deliver pre-emptive rate cuts this summer. Officials had previously said they were looking for greater confidence that inflation was returning to their target and were optimistic another month or two of data might meet that standard.
This is why investors shrugged off Powell's 'reset' of Fed rate-cut expectations
Investors largely took Federal Reserve Chair Jerome Powell's comments on the outlook for interest rates in stride on Tuesday - a development that might have come as a surprise to some market watchers.
One might have expected Powell delivering what economists at Evercore ISI described as a "measured reset" of the Fed's plans for rate cuts to have elicited more volatility in markets.
Rate Cuts Are the Direction of Travel, BOE's Lombardelli Says
The Bank of England is likely to cut its key interest rate over the coming months, but exactly when is uncertain, the incoming deputy governor for monetary policy said Tuesday.
Appearing before lawmakers at a confirmation hearing, Clare Lombardelli said an easing of monetary policy is clearly "the direction of travel" across Europe, but declined to comment on the exact timing of a first reduction in the BOE's key rate.
Louis Vuitton Owner LVMH Posts Lower Revenue Amid Luxury Slowdown
LVMH Moet Hennessy Louis Vuitton reported a decrease in revenue for the first quarter, missing analysts' expectations, amid what it called a geopolitical and economic environment that remains uncertain.
The French luxury conglomerate-which houses brands Dior and Louis Vuitton, among others-said Tuesday that revenue for the first three months of the year came in at EUR20.69 billion, down 2% in reported terms compared with the year-earlier period.
Rio Tinto Maintains Annual Guidance After First-Quarter Iron-Ore Shipments Fall 10%
SYDNEY-Rio Tinto maintained its 2024 guidance after the Australian mining giant reported a 10% fall in first-quarter iron-ore shipments.
The world's second-biggest miner by market value on Wednesday said it shipped 78.0 million metric tons of iron ore from its mines in Australia's Pilbara region in the three months through March. That is a 10% decline compared with the immediately preceding December quarter, and down 5% on the same period a year ago.
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Expected Major Events for Wednesday
06:00/UK: Mar UK producer prices
06:00/UK: Mar CPI
07:00/TUR: Feb Balance of Payments
07:00/CZE: Mar PPI
07:00/SVK: Mar Harmonized CPI
07:00/AUT: Mar CPI
08:30/UK: Feb UK House Price Index
08:30/UK: Jan Card Spending statistics
09:00/CYP: Mar Harmonised CPI
09:00/EU: Mar Harmonised CPI
09:00/MLT: Mar Harmonised CPI
10:00/FRA: Feb OECD Harmonised Unemployment Rates
10:00/FRA: 4Q OECD Quarterly Labour Market Situation
10:00/POR: Mar PPI
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(END) Dow Jones Newswires
04-17-24 0019ET
