ASX 200 futures are trading 79 points higher, up 1.08% as of 8:20 am AEDT.
The Dow closed above 37,000 points for the first time, the Fed kept interest rates on hold and projected three rate cuts in 2024, gold reclaims the US$2,000 level as yields tumble, the Fed expects US inflation to ease to 2.6% in 2024, small cap stocks surge as investors cheer for rate cuts and a few sectors to watch as the market opens on Thursday.
Let's dive in.
Thu 14 Dec 23, 8:22am (AEST)
Thu 14 Dec 23, 8:22am (AEST)
S&P 500 rallies intraday to finish near best levels, less than 3% away from all-time highs
Nasdaq 100 closed off best levels, less than 2% away from all-time highs
Dow clears January 2022 peak, marks record close
Russell 2000 surges 3.5% to best levels since August 2023
US 2-year yield dives 27 bps on dovish Fed forecasts, lowest since June 2023
Gold reclaims the US$2,000 level on lower yields and US dollar
Investor Intelligence bulls increased to 55.6% for week ended December 12, marks the third straight week of caution territory or a level not seen since the late July peak
Oil near 5-month lows as Russian exports add to oversupply fears (Bloomberg)
Survey suggests majority think Fed cuts could begin by June 2024, with high chance of soft landing (CNBC)
Market-implied inflation expectations fall to lowest levels since June (Bloomberg)
Record-breaking US$5tn S&P 500 options expiration expected as dealers work to stabilise US stock swings (Reuters)
Argentina devalued peso by more than 50% as new President Milei begins to implement economic agenda (Reuters)
Apple to soon face EU antitrust order and potential fine (Bloomberg)
Etsy to lay off 11% of workforce citing challenging macro environment (CNBC)
OpenAI to offer news in ChatGPT after striking deal with Axel Springer (CNBC)
Pfizer shares tumble to 10-year lows as earnings guidance misses expectations (CNBC)
Tesla shares eased after recall of 2m vehicles in the US (CNBC)
Fed keeps rates unchanged, in-line with market expectations (Bloomberg)
Fed statement acknowledges inflation has eased over the past year (Federal Reserve)
PBOC seen adding to net MLF injections on Friday but economists expect rate may stay unchanged, markets eye reserve requirement cut (Bloomberg)
China economic conference concludes with no view of stronger stimulus (Bloomberg)
China says it will step up policy adjustments and focus on industrial policy to drive recovery in 2024 (Reuters)
China's export prices decline as domestic demand dries up (Nikkei)
US producer prices flat month-on-month in November, annualised came in a 0.9%, below consensus for 1.0% (Reuters)
UK growth sees deeper contraction at start of Q4 (Bloomberg)
Japan manufacturer conditions jump to highest in almost two years (Reuters)
South Korea unemployment rate rises to four-month high (Yonhap)
Thu 14 Dec 23, 8:23am (AEST)
The Fed held rates steady at 5.25% to 5.5%. Here are some of the key takeaways from the rate decision and FOMC economic projections:
Fed officials see inflation at 2.4% in 2024, returning to 2.0% target by 2026
Noted how "inflation eased but remains elevated"
Fed says economic growth has slowed since the third quarter of 2023
FOMC median forecast shows 75 bps of cuts in 2024 to 4.6%
8 of 19 officials see policy rate above the 2024 median, 5 see it below that
5 officials see 100 bps worth of rate cuts in 2024 vs. zero in October
No policymaker sees end-2024 rates above current levels
FOMC median forecast shows rates to fall to 3.6% at end of 2025
The S&P 500 surged around 0.5% within the first five or so minutes after the rate decision.
The Fed press conference kicked off 30 minutes after the rate decision. It's important to treat the rate decision and presser as two different events. There have been plenty of instances where the markets sold off on Powell's comments at the presser – Today was quite the opposite. Here are some of Powell's highlights:
More is needed: "The lower inflation readings over the past several months are welcome, but we will need to see further evidence to build confidence that inflation is moving down sustainably toward our goal."
Inflation progress: "As evident from the SEP, we anticipate that the process of getting inflation all the way to 2% will take some time. The median projection in the SEP is 2.8% this year, falls to 2.4% next year, and reaches 2% in 2026."
Rate optionality: "We added 'any' as an acknowledgment that we are likely at or near the peak rate for this cycle. Participants didn't write down additional hikes that we believe are likely, so that's what we wrote down. But participants also didn't want to take the possibility of further hikes off the table, so that's really what we were thinking."
Recession odds: "I think you can say that there's little basis for thinking that the economy is in a recession now. I think there's always a probability that there will be a recession in the next year and it's a meaningful probability, no matter what the economy's doing."
Sticky services: "We've seen real progress in core inflation. It has been sticky. And famously, the service sector is thought to be stickier, but we've actually seen reasonable progress in non-housing services, which was the area where you would expect to see less progress."
Markets are becoming increasingly overextended but also trying to price in all the 'good stuff' like a soft landing and more rates cuts in 2024 – A view that was validated by the Fed's projections overnight.
Gold: Is it clear skies for gold as the Fed joins the 'rate cuts in 2024' bandwagon? Gold prices reclaimed the key US$2,000 level and the VanEck Gold Miners ETF surged 6.38% overnight. Let's see if this draws a strong response for local gold names.
Resources: BHP and Rio Tinto ADRs rallied 3.06% and 1.47% respectively overnight. A weaker US dollar and lower yields is typically a tailwind for commodity markets.
Small caps: The depressed small cap space surged overnight. The Russell 2000 Growth ETF finished 3.2% higher. Let's see if this brings some life back into growth laggards.
Yield sensitive sectors: Yield sensitive sectors like Utilities and Real Estate outperformed overnight. Those two S&P 500 sectors were up more than 3% overnight.
ASX corporate actions occurring today:
Trading ex-div: WCM Global (WQG) – $0.01, Metcash (MTS) – $0.11, Plato Income Maximiser (PL8) – $0.006
Dividends paid: Graincorp (GNC) – $0.14, ResMed (RMD) – $0.04, ALS (ALQ) – $0.19, Stanmore Resources (SMR) – $0.08, Civmec (CVL) – $0.03
Listing: None
Economic calendar (AEDT):
11:30 am: Australia Unemployment Rate (Nov)
11:00 pm: UK Interest Rate Decision
12:15 am: Eurozone Interest Rate Decision
12:30 am: US Retail Sales (Nov)
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