Fed sees more but slower hikes ahead

US equities slipped Wednesday in the face of weak economic data from China and the hawkish tone of the most recent Federal Reserve meeting minutes. The Dow Jones dropped 110 points, the S&P 500 edged down 0.2% while the Nasdaq ended practically flat. European equity markets also ended in negative territory, with the Euro Stoxx 50 Index retreating by 0.9% on the back of persistent evidence that tighter monetary policy from the ECB is having a greater impact on the European economy. 

Summary for 06.07.2023 

• Asian equity markets mostly fell on Thursday, taking cues from a negative lead on Wall Street. Meanwhile, data showed that Australia’s trade surplus came in above forecasts in May as exports growth outpaced imports. Shares in Australia, Japan, South Korea and Hong Kong declined, while mainland China equities rose. 
• European shares are set for further declines while US equity futures were steady as investors digest the latest Fed minutes which showed that most officials would support more rate increases ahead. 
• Oil prices rose slightly this morning after jumping almost 3% yesterday, as markets weighed signs of a bigger-than-expected draw in US inventories and tighter supplies against fears of rising interest rates. Industry data showed that crude inventories in the US declined by 4.382 million barrels last week, marking the third consecutive weekly draw and nearly double the 2.408-million-barrel drop from the preceding week. 
• Federal Reserve officials struck a tenuous agreement to pause interest-rate increases at their June meeting, all but committing to hike again later this month in a bid to keep fighting stubborn inflation. The minutes from the Fed’s June 13-14 meeting show that while almost all officials deemed it “appropriate or acceptable” to keep rates unchanged in a 5% to 5.25% target range, some would have supported a quarter-point increase instead. The minutes also showed that a large majority of policymakers — “almost all” — agreed that more tightening will likely be needed this year. It provided ample evidence that the Fed likely isn’t done.   
• Producer prices in the Euro Area declined by 1.5% year-on-year in May, following a downwardly revised 0.9% in April and compared to market expectations of a 1.3% drop. It marked the first month of decline in producer prices since December 2020, driven by a significant 13.3% slump in energy costs and 1.5% drop in the cost of intermediate goods. On a monthly basis, producer prices fell by 1.9%, marking the fifth consecutive month of decrease. 
• Meta’s Instagram officially unveiled Threads, an app designed as a direct rival to Twitter, launching the most serious threat yet to Elon Musk’s struggling social media site. On Threads, people can post text and links and reply to or repost messages from others. The app will also let users port over their existing follower lists and account names from Instagram, as well as Meta’s photo and video-sharing app.  
• Alphabet shares rose about 1.8% yesterday after Piper Sandler analyst Thomas Champion raised his price target to $140 from $128, saying Google Search’s market share “appears to be holding steady” despite the potential competition from artificial intelligence. 
• Hertz shares rose about 1.7% Wednesday after Jefferies initiated a “buy” rating on the car rental company’s shares, citing expectations for higher pricing and margins. 
• Rivian shares rose more than 4% after the electric vehicle maker reported 12,640 deliveries during the second quarter, up 59% from the previous quarter and higher than analyst expectations.