Fed leaves door open to further tightening

US equities fell broadly for the second day in a row Wednesday, with the Nasdaq Composite sinking to a seven-week low, after minutes from the Federal Reserve’s most-recent policy meeting renewed concerns about the potential for additional interest rate increase.  The S&P 500 index dropped near six-week lows, while the 10-year Treasury yield hit its highest level in nearly 16 years as investors grappled with the possibility that the US economy may be too strong for its own good, at least from the Fed’s perspective.  In Europe, the Euro Stoxx 50 index retreated 0.1% yesterday, the lowest in five weeks as losses across media shares more than offset a rise in retail equities. 

Summary for 17.08.2023 

• Most Asian shares fell on Thursday after hawkish signals from the Federal Reserve spurred deep losses in technology shares, while weak economic readings fuelled more concerns over a Chinese economic slowdown.  Investors also reacted to data showing Japanese exports declined for the first time since February 2021 in July, while the Australian unemployment rate rose to a three-month high of 3.7%.  Tech-heavy Asian indices logged the heaviest losses this morning, with the Hang Seng index sliding 1.6%, while the Kospi shed 0.6%. 
• Oil prices were choppy on Thursday after falling over the past three sessions, with the undertone grim on worries that slowing growth in China and possible further US interest rate hikes will weaken fuel demand in the world’s two biggest economies. 
• European shares are poised for losses and US equity futures also dropped on growing worries around China’s economy and the potential for higher Fed rates. 

• Federal Reserve officials at their policy meeting in July largely remained concerned that inflation would fail to recede and that further interest-rate increases would be needed.  But at the same time, cracks in that consensus were also becoming more apparent.   
• China ramped up its efforts to stem losses in the yuan by offering the most forceful guidance since October through its daily reference rate for the managed currency.  The boost comes as broad dollar strength combined with evidence of China’s sluggish economy helped to push the onshore yuan towards a 16-year low on Wednesday.  The move suggests the People’s Bank of China is looking to limit yuan losses exacerbated by a surprise rate cut this week.   
• Fitch Ratings may consider rethinking China’s A+ sovereign credit rating amid growing economic headwinds to the Sian giant, especially if corporate debt conditions worsen in the country. 
• Cisco Systems late Wednesday reported stronger-than-expected fiscal fourth-quarter results, buoyed by double-digit growth in product sales.  The provider of networking, cloud, and security solutions said adjusted EPS rose to $1.14 during the three months ended July from $0.83 a year earlier, compared with the consensus expectations of $1.06.  Revenue gained 16% to $15.2 billion, higher than Wall Street’s $15.05 billion view.  Shares rallied by 2.1% in after-hours trading. 
• General Motors fell 1.4% yesterday following reports the United Auto Workers president said its members would vote on a possible strike next week because contract negotiations are moving too slowly. 

• Target shares rose nearly 3% on Wednesday as its results for the last quarter weren’t as bad as analysts had expected.