US equities closed lower Wednesday after sharply cutting intraday gains as Federal Reserve chairman Jerome Powell dismissed market bets of a rate cut following the central bank’s widely expected quarter-point rate hike.  The Dow Jones Industrial Average slipped 1.6%, the Nasdaq Composite fell 1.6%, and the S&P 500 fell 1.7%.  Meantime, European equity markets closed in the opposite direction, with the Euro Stoxx 50 Index up by 0.3%, led by food and beverage equities. 

Summary as at 23.03.2023 

  • Most Asian equity markets moved in a flat-to-low range on Thursday as markets weighed the prospect of a less hawkish Fed against increased economic headwinds in the coming months.  The Hang Seng was the sole outperformer of the day, rising 0.7% after Tencent Holdings logged better-than-expected annual results.  Chinese indices were mixed, with the Shanghai Composite down 0.1%, as major property equities sank after China Evergrande Group outlined a debt restructuring plan which could set a precedent for the rest of the sector. 
  • European shares are set for losses while US equity futures are pointing to a flat start as investors digest comments from the US Treasury and messaging from the Fed following its rate hike. 
  • Oil prices fell in Asian trade on Thursday after the Fed hiked interest rates as expected but downgraded its GDP outlook for the year.  Media reports also suggested that OPEC+ is likely to keep output unchanged during an April meeting and will maintain a previously announced 2 million barrel per day cut. 
  • The Federal Reserve raised interest rates by 0.25% to a range of 4.7% to 5% on Wednesday and maintained its forecast for one more hike this year.  However, Fed chair Jerome Powell firmly dismissed market bets for a rate cut later this year even as a wobble in the banking sector is expected to tighten credit conditions and help cool inflation.  Ahead of the meeting, markets expected that the Fed would cut rates later this year, but Powell quickly dismissed those expectations. 
  • Treasury Secretary Janet Yellen told members of a Senate Appropriations subcommittee yesterday that Federal bank regulators are not considering any plans to insure all US bank deposits without congressional approval.  The statement fuelled a decline in the equity market and a drop in regional bank shares. 
  • ECB officials are growing increasingly confident that the eurozone banking system has withstood the financial turmoil, allowing them to envisage resuming interest-rate hikes in due course.  Policymakers consider themselves vindicated after they followed through on their 50 basis-point hikes last week despite global market volatility.  
  • The annual inflation rate in the UK unexpectedly increased to 10.4% in February from 10.1% in January, the first increase in four months and compared to forecasts of 9.9%.  Compared to January, the CPI jumped 1.1%, the biggest rise in four months. 
  • China Evergrande Group this morning announced a debt restructuring proposal which failed to impress investors because of its long repayment period and lack of enough sweeteners.  The plan provides two main options to its dollar bondholders to recoup their investments.  Creditors can either swap all their holdings into new notes with maturities of 10 to 12 years or convert them into different combinations of new notes with tenors of five to nine years and equity-linked instruments.