Markets pause post US Fed statement after recent volatility

Asia market update: Markets pause post US Fed statement after recent volatility; Broad US$ weakness; Where to from here with all the uncertainty?

General trend

- Markets today are quietly feeling their way forward after a tumultuous couple of weeks and post US Fed decision.

- Financials in Asia have acted as a drag on the indices (after yesterday’s broad gains).

- US equity FUTs are mildly higher post Fed statement.

- Traders assess the comments from US Fed Chair Powell overnight: “We will no longer state that ongoing rate increases will be appropriate to quell inflation; We now anticipate some additional policy firming may be appropriate”.

- With underlying nervousness around financial stability, Central Banks around the world are now feeling the need for a more nuanced balance in fighting inflation on one hand, but conscious of tighter credit conditions for households and businesses on the other.

- England’s BOE sums up the quandary for many CBs after a shock 10.4% print on UK CPI overnight, above all expectations, but on top of an economy that may be feeling pain.

- Taiwan Central Bank, Philippine’s BSP, Switzerland’s SNB and UK’s BOE all have rate decisions due later today.

- Uncertainty abounds for all. As the Fed summed up when talking about recent financial stability: “The extent of these effects is uncertain”.

- How high to go on deposit rates? Will the Fed pause or end the rate hike cycle in May?

- Market expectations are now 67% for rates being unchanged at the May Fed meeting.

- Tencent rises following earnings.

Headlines/economic data

Australia/New Zealand

- (AU) ASX 200 opens -0.5% at 6,979.

- (NZ) New Zealand Feb Heavy Truckometer M/M: -0.7% v +0.8% prior.

- (NZ) New Zealand sells NZ$400M v NZ$400M indicated in 2027, 2032 and 2037 bonds.

- (NZ) Reserve Bank of New Zealand (RBNZ) Chief Economist Conway: If inflation expectations don't fall, will have to do more on interest rates.

China/Hong Kong

- (HK) Hang Seng opens +0.1% at 19,619.

- (CN) Shanghai Composite opens -0.2% at 3,258.

- (HK) Hong Kong Monetary Authority (HKMA) raises base rate by 25bps to 5.25% (as expected).

- CN) China Feb Swift Global Payments (CNY): 2.2% v 1.9% prior.

- (CN) China PBOC Open Market Operation (OMO): Sells CNY64B v CNY67B prior in 7-day reverse repos: Net drains CNY45B v drains CNY37B prior.

- (CN) China PBOC sets Yuan reference rate: 6.8709 v 6.8715 prior.

- (CN) Insurers in China to discuss debt-asset risk following SVB crisis; the cos. to meet with the China Banking Insurance Regulatory Commission on Thurs. [Mar 23rd] - China press.

- (CN) China Pres Xi: Changes are coming that have not happened for 100 years; China and Russia are promoting these changes together - comments leaving Moscow.

- Evergrande Real Estate Confirms proposed restructuring of offshore debt, sees effective October 1st [relates to $22.7B in offshore debt] - announces that these discussions have culminated in binding agreements with members of an ad hoc committee of holders of the Existing Notes (the ‘‘AHG’’) on the key terms of the Proposed Restructuring*.

Japan

- (JP) Nikkei 225 opens -0.9% at 27,232.

- (JP) Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 50bps; Opens window to buy unlimited amount of 10-year JGBs at 0.50% [as expected].

- (JP) Japan PM Kishida: Felt strong need to support Ukraine upon meeting Pres Zelensky.

South Korea

- (KR) Kospi opens -0.8% at 2,398.

- (KR) Bank of Korea (BOK) held meeting to review Fed decision: Overall financial sector sound; non-bank firms face stress from the weak property market.

- (KR) South Korea sells KRW1.0T vs. KRW1.0T indicated in 2-month Financial Bills.

Other Asia

- (TW) Taiwan Foreign Min: Situation with Honduras is not good; We will work hard to the last moment.

- (MY) Malaysia end-Mar Foreign Reserves: $114.0B v $114.3B prior.

- (SG) Singapore Feb CPI M/M: 0.6% v 0.2% prior; Y/Y: 6.3% v 6.5%e (lowest headline Y/Y CPI since May 2022).

North America

- (US) FOMC raises target range by 25bps to 4.75-5.00%; as expected: "Some additional firming" may be appropriate rather than referring to "ongoing rate increases"; Median FY23 SEP fed funds dot unchanged at 5.1%.

- (US) FOMC summary of economic projections (SEP) for March - Affirms Median forecast for end-2023 rate 5.125% (prior 5.125%).

- (US) Fed Chair Powell: We did consider a pause at this meeting; Rate cuts this year is not our baseline expectation; Credit tightening could mean less work for rate policy - Q&A.

- Treasury Sec Yellen testified that taxpayers would not bear the costs related to failed banks; US banking system was sound. Not considering a broad increase in deposit insurance. There will be one more 25bps hike this year and 75 bps cuts in 2024.

Europe

- (FI) ECB's Rehn (Finland): ECB will focus first on price stability, then financial stability.

- (DE) Germany Fin Min Lindner: Price for China cooperation must not be creeping loss of democracy and freedom worldwide.

Levels as of 01:20 ET

- Nikkei 225, -0.1%, ASX 200 -0.7% , Hang Seng +1.1%; Shanghai Composite +0.3% ; Kospi +0.2%.

- Equity S&P500 Futures: +0.5%; Nasdaq100 +0.5%, Dax -0.3%; FTSE100 -0.3%.

- EUR 1.0908-1.0855 ; JPY 131.49-130.41 ; AUD 0.6742-0.6680 ;NZD 0.6288-0.6213.

- Gold +1.5% at $1,979/oz; Crude Oil -1% at $70.19/brl; Copper +0.9% at $4.0720/lb.