GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)

The Dow closed more than 530 points lower on Wednesday. At the same time, the S&P 500 and Nasdaq 100 fell 1.6% as investors weighed comments from Federal Reserve Chairman Jerome Powell and worried that turmoil in the banking sector could slow the economy. As expected, the Fed raised the fed funds rate by 25 basis points to 4.75%–5%, with the Fed forecasting only one more hike this year. At a news conference, Fed Chairman Jerome Powell said a pause was being considered days before the meeting, sending stocks higher. Still, a few minutes ago, he said inflation was still rising, and the central bank remained committed to bringing it down to 2%, reiterating that rates would rise further if needed and that the committee would not cut rates this year. On the corporate front, GameStop shares soared nearly 35.2% after reporting their first quarterly profit in two years. Meanwhile, First Republic Bank fell almost 15.5%.

The Canada S&P/TSX composite index fell 0.6%, around 19,530, on Wednesday after two sessions of gains as investors digested comments from Federal Reserve Chairman Jerome Powell. As expected, the Fed raised its fund's rate by 25 basis points to curb inflation despite the banking crisis. Domestically, yesterday's Canadian CPI came in below expectations, boosting hopes that Canadian banks' borrowing costs have peaked. As a result, financials (-0.8%), energy producers (-1.4%), and miners (-1.4%) posted losses. Meanwhile, real estate companies fell more than 1% as the latest data from Statistics Canada showed new home prices continued to fall.

London stocks fell in early trade and closed up 0.4% at 7,567 on Wednesday. Investors digested higher-than-expected domestic inflation data and assessed its impact on the Bank of England's monetary policy. UK consumer prices rose by an annualized 10.4% in February, well above expectations for a 9.9% increase and unexpectedly accelerating from 10.1% in the previous month. The result bolstered the case for further monetary tightening at the Bank of England's meeting tomorrow, with its key interest rate expected to rise by 0.25 percentage points. Meanwhile, improving global financial conditions could translate into a 25 basis point rate hike by the Fed after today's close. Banks were among the session's winners, extending a rebound after a sharp sell-off in the previous week, with HSBC up 1.9%. On the other hand, real estate companies closed lower.

The ruble-based MOEX Russia index pared losses to close 0.2 percent lower at 2, near a six-month high. Gazprom shares fell 0.6%, extending yesterday's losses, but were still 3% higher than last week. St. Petersburg Bank rose 10%, sending financial stocks sharply higher.

European stock indexes attempted a third straight session of gains on Wednesday, with the DAX up 0.4% and the STOXX 600 up 0.3%, although gains were capped by caution ahead of the Federal Reserve's interest rate decision later in the day. Meanwhile, traders digested higher-than-expected UK inflation data, adding to bets that the Bank of England will have to keep raising rates to rein in high inflation. Financials were the best-performing sector, with banks trading in the green after posting their biggest gains since October the previous day. On the other hand, real estate, utilities, and basic materials were the worst performers. The CAC 40 was flat on Wednesday, falling near 7,106, in line with regional peers, as investors await the Federal Reserve's monetary policy decision due today. Among individual stocks, Unibail-Rodamco (-3.5%), TotalEnergies (-1.1%), and Airbus (-0.8%) were the biggest losers. Conversely, Laurel (+0.8%) has improved the most. Also, banking stocks are in the green: Crédit Agricole (+0.8%) and BNP Paribas (+0.7%). Domestically, French President Emmanuel Macron said there would be no government reshuffle, new parliamentary elections, or a referendum on pension reform. The FTSE MIB traded cautiously around 26,580 on Wednesday after two days of gains, hours ahead of the US Federal Reserve's monetary decision. Markets expect the Federal Reserve's monetary policy tightening to slow, even as inflation remains out of control due to financial market turmoil linked to the banking crisis. Meanwhile, the latest UK inflation data showed persistent inflationary pressures. Among the major stocks in Milan, Terna (-1.6%) and Azimut Holding (-1.2%) led losses; Finecobank (+1.6%) and Nexi (-0.8%) were the biggest gainers. Elsewhere, utility Hera's stock rose 0.7% after the publication of its 2022 accounts. Meanwhile, markets do not appear to be rewarding Telecom Italia after it struck a deal with unions to cut up to 2,000 jobs in Italy through a voluntary early retirement scheme to streamline domestic operations (-0.5%).

On Wednesday, the Nikkei 225 rose 1.8% to close above 27,400. In comparison, the broader Topix rose 2% to close at 1,967 in post-holiday trade, erasing losses from earlier in the week and following the Wall Street rise on hopes that the worst of the banking turmoil is over on expectations that the Federal Reserve will tighten policy less aggressively. U.S. Treasury Secretary Janet Yellen said the government would take further action to protect deposits. At the same time, the Fed is expected to raise rates more modestly by 25 basis points, given easing inflationary pressures and the recent banking crisis. As a result, financial stocks rose strongly, including Mitsubishi UFJ (3.1%), Sumitomo Mitsui (2.8%), and Mizuho Financial (3%). All other sectors also rose, with index heavyweights such as Keyence (3.2%), Nippon Yusen (3%), and Sony Group (1.4%) making notable gains.

Hong Kong stocks rose 332.67 points, or 1.73%, to 19,591.43 on Wednesday, rebounding for the second consecutive session, near a two-week high, after another strong session on Wall Street boosted stocks on Monday, as U.S. Treasury Secretary Yellen said the government was prepared to protect small Fears of a banking crisis receded further after bank depositors. Locally, overnight borrowing costs in Hong Kong plunged 175 basis points to 2.4% today after reaching their highest level in at least 17 years on Tuesday at 4.41%. In China, developer Evergrande Group is set to unveil a restructuring proposal for its $27 billion offshore debt amid an ongoing property slump. Traders are now waiting to see if the Fed will stick to its hawkish line to curb sticky inflation or pause rate hikes. Financials rose about 2.5%, followed by real estate, consumer goods, and technology. Wharf real estate investment surged (5.7%), followed by BYD Electronics (5.4%), AIA Group (3.6%), China Unicom (3.3%), and China Overseas Land (2.8%).

New Zealand shares closed up 55.63 points, or 0.48%, at 11586.93 on Wednesday, snapping two days of losses while trying to shake off a four-month low hit earlier this week. Wall Street's long rally on Tuesday was buoyed by fears of turmoil in the banking sector, which further subsided after Treasury Secretary Janet Yellen said the U.S. government was willing to take further action to protect deposits. Meanwhile, investors braced for the outcome of the Federal Open Market Committee meeting later today. The CME FedWatch tool shows that the market currently sees about a 14% chance of the central bank not raising interest rates and about an 86% chance of raising rates by 25 basis points. Technology, healthcare, and consumer durables, while financials were weak, led to gains. The market's largest stock, Fisher & Paykel Health, rose 1.7%, followed by Ebos Group (1.9%), Spark New Zealand (1.2%), Restaurant Brands (4.7%), and KMD Brands (4%).

The S&P/ASX 200 rose 1% to around 7,024 on Wednesday, its second straight session of gains, buoyed by Wall Street's positive lead on hopes that the worst of the banking sector turmoil is behind us and the Fed is expected to tighten policy less aggressively. The Reserve Bank of Australia also said it would reconsider its rationale for suspending its April meeting to reassess the economic outlook, according to the minutes of its policy meeting released on Tuesday. Financial stocks led the gains, with Commonwealth Bank (2.2%), Macquarie Group (1.9%), and ANZ Banking Group (1.9%).
The India BSE Sensex rose 140 points to close at 58,215 on Wednesday, extending the previous session's rally and building on Wall Street's closing gains, with bank stocks continuing to rise. Indian banks tracked U.S. banks' gains after Treasury Secretary Janet Yellen pledged to protect consumer deposits above the current FDIC threshold, sending Bajaj Finserv, Bajaj Finance, and Indus Bank up between 3.2% and 1.2 percent on the session. Reassurance from the financial sector also supported risky tech firms trading in Mumbai, with TCS and Tech Mahindra closing in the green. Meanwhile, investors await the Federal Reserve's policy decision before tomorrow's market opens.

Brazil's Ibovespa closed 0.8% lower, around 100.170 on Wednesday, a low not seen since late July 2022, as investors weighed the Federal Reserve's policy decisions pending Brazil's central bank. The US Federal Reserve made a 25 basis point rate hike due to the recent turmoil in the banking system. Domestically, Brazil's central bank is expected to leave the Selic rate stable at 11.75% for the fifth consecutive meeting. Traders have been monitoring signals about the path of future interest rates and the economic outlook. Heavyweight Petrobras fell 0.3% on lower oil prices and news of diesel price cuts, while miner Vale fell 1.1%, mainly on oil ore and iron devaluation. Among individual stocks, BRF (-6.8%), Vibra (-6.4%), and Sendas (-6.8%) were the biggest losers, while MRV jumped 4.6%, followed by Eztec (+4.6%).

 

Reviewing the last economic data:

Reviewing the latest economic  news, the most critical data is:

- US: In March 2023, the Fed raised the Fed funds rate by 25 basis points to 4.75%–5%, matching the increase in February and pushing borrowing costs to their highest level since 2007 amid rising inflation. The decision aligned with most investors' expectations, although some argued the central bank should pause its tightening cycle to support financial stability. The Fed noted that the U.S. banking system is sound and resilient. Nevertheless, recent developments could tighten credit conditions for households and businesses and weigh on economic activity, employment, and inflation. Meanwhile, the Fed funds rate is expected to hit 5.1% this year, the same as in December, and slightly higher at 4.3% by the end of 2024 and 4.1% in 2025, the same as last December. The PCE inflation forecast was revised this year (3.3% vs. 3.1%) but held steady in 2024 (2.5%). As a result, economic growth will slow slightly in 2023 (0.4% vs. 0.5%) and next year (1.2% vs. 1.6%).

- US: For the week ended March 17, 2023, the average U.S. contract rate for 30-year fixed-rate mortgages with eligible loan balances ($726,200 or less) decreased 23 basis points to 6.48 percent, the second consecutive weekly decline of 11 percent. The biggest drop since mid-January Borrowing costs is now at their lowest level almost a month after turmoil in the banking sector sent U.S. Treasury yields lower. Mortgage rates, however, remain well above the 4.5% they were a year ago. Meanwhile, U.S. Treasury yields rebounded from March 20 as concerns about the health of the global financial system eased amid government intervention to boost confidence.

- U.S.: U.S. mortgage loan applications rose 3% for the week ended March 17, 2023, the third straight week of growth, according to the Mortgage Bankers Association. Applications to refinance home loans increased by 4.9 percent, and applications to buy a home increased by 2.2 percent. Meanwhile, the average contract rate for 30-year fixed-rate mortgages with qualifying loan balances ($726,200 or less) fell 23 basis points to 6.48%, the second straight weekly decline and the biggest drop since mid-November. Borrowing costs are now at their lowest level in almost a month after turmoil in the banking sector sent

- U.S. Treasury yields lower. Mortgage rates, however, remain well above the 4.5% they were a year ago.

In February 2023, Russia's producer prices fell by 7.5% year-on-year, the fourth consecutive decline and the fastest since May 2020, when the epidemic caused energy and commodity prices to plummet. In addition, producer prices in the mining and extractive sectors fell sharply (-26.3% vs. -18.7% in January) as Russian commodity prices fell due to sanctions from Western countries and a slowdown in Asia. On the other hand, the cost of manufactured goods fell by a smaller margin (-3.9% vs. -2.7%), while inflation slowed at suppliers of electricity, gas, steam, and air conditioning (8.5% vs. 14%). Still, producer prices rose 0.9% on a monthly basis, the first increase since April 2022, after falling 0.9% in January.

- CA: In February 2023, new home prices in Canada fell 0.2% from the previous month, extending January's decline by the same amount. It marked the sixth month that new home prices have not risen, as the Bank of Canada's tightening action put upward pressure on mortgage costs and negatively impacted demand for property. Prices were largely unchanged or lower in 25 of the 27 census tracts. On an annual basis, the cost of new homes rose 1.4 percent, slower than a 2.7 percent increase in the previous month. In addition, the Canada Mortgage and Housing Corporation reported a 44.1 percent increase in unsold new single-family homes compared to last February.

- UK: The Confederation of British Industry survey showed that the total balance of orders in March 2023 fell to -20 from -16 in the previous month, the lowest level since February 2021 and below market expectations of -15. Also, export orders fell to -23 from -27. Meanwhile, the CBI's expected selling price index fell to +25 in March, the lowest level since March 2021, from +40 in February, but still strong from a historical perspective. "Falling output and weak orders underscore the challenging demand environment for UK manufacturing," said Anna Leach, deputy chief economist at the Confederation of British Industry. "Combined with some relief in input costs, this appears to have contributed to a significant softening of sales price expectations for the next quarter."

- UK: U.K. stocks were set to open lower on Wednesday as investors reacted to data showing inflation unexpectedly jumped in February as food and energy bills continued to rise, supporting the Bank of England's case for further monetary tightening. The country's annual inflation rate increased 10.4% year-on-year in February, up from 10.1% in January, beating expectations for a 9.9% growth. Investors now look ahead to the Bank of England's interest rate decision on Thursday. FTSE 100 futures were down 0.2% in premarket trade.

- UK: UK annual inflation unexpectedly edged slightly to 10.4% in February 2023 from 10.1% in January, the first increase in four months, compared with a forecast of 9.9%. The greatest upward pressure came from the cost of food and non-alcoholic beverages (18%, the highest since August 1977, compared to 16.7%), mainly due to shortages of salads and other vegetables, bad weather in southern Europe and Africa, and the impact of rising electricity prices; restaurants and hotels (12.1%, the highest since June 1991, when 10.8%); clothing and footwear (8.1% versus 6.2%); and health (6.8% vs. 6.3%). On the other hand, transportation prices (2.9% vs. 3.1%) slowed, especially for motor fuel, furniture (8.7% vs. 9.2%), housing and utilities (26.6% vs. 26.7%), and entertainment and culture (4% vs. 5%). Compared with January, the CPI rose 1.1%, the biggest gain in four months.

- AU: Australia's Western Pacific Melbourne Institute Leading Economic Index fell 0.06% in February 2023 after falling 0.12% in the previous month. Meanwhile, the six-month annualized growth rate for the index, which indicates the likely pace of economic activity relative to trend over the next three to nine months, edged up to -0.94% from -1.04% in January, marking the seventh negative report. "Economic growth is just 1 percent in 2023," said Westpac chief economist Bill Evans. "The slowdown reflects the lagged effects of rising interest rates, a severe shock to real wages, bottoming out savings rates, and falling house prices," he added. The latest developments in the global banking system are unlikely to impact Australia's financial system. Still, they would be a further headwind for major advanced economies, notably by reducing the availability of credit and dampening confidence.

Westpac's McDermott-Miller consumer confidence index rose to 77.7 in the first quarter of 2023, rebounding slightly from a record low of 75.6 in the previous quarter but still indicating low confidence levels. An index measuring current economic conditions edged up 1 point to 72 as households grappled with soaring living costs and mortgage rates. Meanwhile, an index measuring future economic conditions rose 2.8 percentage points to 81.4, despite Westpac predicting financial stress will become more pronounced. While the economic outlook for the next year rose 0.4 percentage points to -41.1, the outlook for the next five years fell 0.8 percentage points to -10.8.

 

LOOKING AHEAD:

Today, investors should watch out for the following important data:

- AUD: MI Leading Index m/m, and CB Leading Index m/m.

- CAD: NHPI m/m, and BOC Summary of Deliberations.

- USD: Crude Oil Inventories, FOMC Economic Projections, FOMC Statement, Federal Funds Rate, FOMC Press Conference, and Treasury Sec Yellen Speaks.

- EUR: ECB President Lagarde Speaks, Current Account, German 10-y Bond Auction, and German Buba President Nagel Speaks.

- GBP: CPI y/y, Core CPI y/y, PPI Input m/m, PPI Output m/m, RPI y/y, HPI y/y, and CBI Industrial Order Expectations.

 

KEY EQUITY & BOND MARKET DRIVERS:

Factors affecting the stock and bond markets are currently:

- U.S. 10-year Treasury yields fell below the 3.5% mark, nearing Monday's six-month low of 3.3%, as investors digested dovish comments from the Fed and eased expectations of a 25 basis point hike in its funds' rate. The Fed said it was on the verge of pausing tightening in response to recent risks to financial stability as bank failures this month threatened the health of systemic banks. Concerns that higher interest rates could increase crisis risk prompted the FOMC to keep its year-end funds' rate forecast unchanged at 5.1 percent, despite a sharp rise in inflation expectations and a cut in unemployment forecasts. Meanwhile, the yield on the 2-year note fell 20 basis points to below 4%, narrowing the inversion of the yield curve.

- U.S. 10-year Treasury yields rose above 3.62%, the highest in a week, as investors turned their attention to the Federal Reserve and moved further away from Monday's six-month low of 3.291%. The central bank is expected to raise rates by 25 basis points later. However, some market participants believe the agency may pause its rate hike cycle due to the recent turmoil in the banking sector. As a result, traders will be keeping a close eye on future guidance, especially with the possibility of terminal rates or more rate hikes this year. Meanwhile, concerns about the banking sector's health have temporarily eased as global authorities quickly restored market confidence. In addition, Treasury Secretary Janet Yellen said the government was prepared to provide additional deposit guarantees if the financial crisis worsened.

- UK: U.K. 10-year gilt yields rose to nearly 3.5%, their highest level in a week after an unexpected acceleration in inflation raised expectations for another rate hike from the Bank of England this week. The latest data showed that Britain's annual inflation rate unexpectedly rose to 10.4% in February from 10.1% in January, the first increase in four months, compared with a forecast of 9.9%. Markets expect the Bank of England to raise interest rates by 25 basis points on Thursday after previous estimates suggested the central bank would hold off on raising rates amid the latest turmoil in the banking sector.

- IT: Italy's 10-year BTP yield rebounded above 4.1% from a six-week low of 4% hit on March 20, amid limited demand for safe-haven government bonds and a tentative restoration of stability in the global banking sector. In addition to easing fears of a crisis, reassurance in Europe's financial industry has given the ECB more leeway to tighten. As previously promised, the ECB raised its key interest rate by 50 basis points this month. Still, recent volatility has kept the central bank from hinting at another rate hike at its next meeting or announcing a faster pace of quantitative tightening after the second quarter. As a result, the spread between 10-year gilts and bunds narrowed to 175 basis points after hitting a 192-month high on March 15.

 

LEADING MARKET SECTORS:

Strong sectors:

Weak sectors: real estate, communication services, utilities, and financials.

 

TOP CURRENCY AND COMMODITIES MARKET DRIVERS: 

Factors in the currency and commodities markets are currently:

- GBP: Sterling strengthened above $1.23 on Wednesday, near its strongest level since June 2022, after new CPI data showed inflationary pressures are now stronger than expected and a dovish Fed tone weakened the dollar. The Fed raised its key interest rate by 25 basis points, as expected by the easing in financial markets. However, it did not commit to a significant hike due to the risk of economic instability from recent bank failures. Meanwhile, UK consumer prices rose 10.4% in February, well above expectations for a 9.9% rise and unexpectedly accelerating from 10.1% the previous month. Core inflation also beat expectations, erasing hopes that the Bank of England had reached peak interest rates. The Bank of England is expected to raise its key interest rate by 25 basis points tomorrow.

- NZD: The New Zealand dollar surged past $0.626, near its highest level since mid-February, as investors dumped the greenback after Federal Reserve Chairman Jerome Powell said policymakers considered pausing rate hikes amid banking turmoil. The Reserve Bank of New Zealand raised interest rates by 50 basis points in its February fix, a widely expected move. The board cited rising inflationary pressures, rising price expectations, and a tight labor market. As a result, the Reserve Bank of New Zealand raised its policy rate by 450 basis points in ten meetings, taking the cash rate to a 41-year high of 4.75%.

- JPY: The yen rose to 131 against the dollar, its highest in five weeks, after the Fed raised interest rates by 25 basis points as expected, but Fed Chairman Jerome Powell told a news conference that the pause was in response to the banking crisis. On the domestic front, minutes from the Bank of Japan's January meeting showed that members reiterated the need to maintain the ultra-loose policy. Reaching the 2% inflation target sustainably and stably will take time. The Bank of Japan kept its ultra-low interest rate policy on hold this month at its final policy meeting before Governor Haruhiko Kuroda retired.

- EUR: The euro strengthened to near $1.09, its highest level since early February, as investors digested the latest FOMC meeting. As most analysts expected, the Fed raised rates by another 25 basis points, although the tone was more dovish. The Fed is expected to hike rates another 25 basis points in May before pausing tightening. In Europe, however, ECB President Christine Lagarde said inflation was still too high, and a strong strategy was crucial. The president added that returning inflation to 2 percent in the medium term is non-negotiable, reinforcing bets for higher interest rates and faster quantitative tightening despite recent turmoil in financial markets. The central bank raised its key interest rate by 50 basis points at its March meeting, a 350 basis point hike since tightening began.

-USD: On Wednesday, the dollar index fell to 102.5 for the fifth straight session, its lowest level since early February. Previously, the Fed raised interest rates by 25 basis points as expected to combat rising inflation, but this indicated that amid the banking crisis, future rate hikes are more uncertain. Meanwhile, the likelihood of the Bank of England continuing to tighten policy increased after UK inflation was higher than expected. In Europe, ECB President Christine Lagarde reiterated that inflation remains high and the central bank is committed to returning it to 2%.

- OIL: Brent crude futures surged above $76 a barrel on Wednesday, extending gains for a third session. The latest EIA data showed a surprise rise in U.S. crude stockpiles and large drawdowns of other fuels like gasoline and inventories of distillate fuels. The UK oil benchmark is more than 4% higher this week as US Treasury Secretary Janet Yellen said the government would be willing to take further action to protect deposits. At the same time, the Fed raised rates by 25 basis points and said a pause was being considered in light of easing inflationary pressures and the recent banking turmoil. The market also remains bullish on the outlook for China, as the IEA said the top crude importer is expected to lead a 2 million barrel increase in global daily oil demand this year. On the supply side, according to Russian Deputy Prime Minister Alexander Novak,

- WTI: Crude oil futures surged above $70 a barrel on Wednesday, extending gains for a third session. The latest EIA data showed a surprise rise in U.S. crude stockpiles and large drawdowns on other fuels like gasoline and inventories of distillate fuels. The US oil benchmark is up 5% this week as US Treasury Secretary Janet Yellen said the government would be willing to take further action to protect deposits. At the same time, the Fed raised rates by 25 basis points and said a pause was being considered in light of easing inflationary pressures and the recent banking turmoil. The market also remains bullish on the outlook for China, as the IEA said the top crude importer is expected to lead a 2 million barrel increase in global daily oil demand this year. On the supply side, according to Russian Deputy Prime Minister Alexander Novak,

- GLD: Gold prices soared past $1,960 an ounce, heading for a one-year high of $1,990 hit on March 17 as investors weighed in on the Federal Reserve's dovish tone in its March policy decision. As vaguely expected by markets, the central bank raised its fund's rate by 25 basis points. Still, it refrained from saying it expects "continuous increases" in borrowing costs to curb high inflation in the US economy. Policymakers eased the urge to lower consumer prices to meet the need for financial stability after bank failures earlier in the month threatened a crisis in the sector and dampened growth expectations. However, the central bank said it still expects further policy consolidation in the near future.

 

Chart of the day:

The Australian dollar rose nearly 1% to $0.67, its highest in almost two weeks after the Fed raised rates by another 25 basis points as expected, but in a more dovish tone, with Fed Chairman Jerome Powell telling a news conference that a pause in rate hikes was considered in response to the banking crisis. In Australia, the Reserve Bank of Australia said it would reconsider its rationale for suspending its April meeting to reassess the economic outlook, according to the latest policy meeting minutes. The minutes also showed that the RBA board considered monetary policy restrictive and uncertain economic outlook. The country's central bank announced a widely expected 25 basis point rate hike at its March meeting, deciding to raise the cash rate for the 10th time in a row and bringing borrowing

 

 

 

Long-term Channel Trading Strategy: - AUDUSD - chart with time-frame (D1); The primary resistance with a potential (consolidation area) is around ( 0.70 ),  and the primary support with a potential (target area) is around ( 0.648 ). Therefore, the next most probable price movement is a (down ) trend (see details on the chart).

GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS: Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS) The Dow closed more than 530 points lower on Wednesday. At the same time, the S&P 500 and Nasdaq 100 fell 1.6% as investors weighed comments from Federal Reserve Chairman Jerome Powell and worried that turmoil in the banking sector could slow the economy. As expected, the Fed raised the fed funds rate by 25 basis points to 4.75%–5%, with the Fed forecasting only one more hike this year. At a news conference, Fed Chairman Jerome Powell said a pause was being considered days before the meeting, sending stocks higher. Still, a few minutes ago, he said inflation was still rising, and the central bank remained committed to bringing it down to 2%, reiterating that rates would rise further if needed and that the committee would not cut rates this year. On the corporate front, GameStop shares soared nearly 35.2% after reporting their first quarterly profit in two years. Meanwhile, First Republic Bank fell almost 15.5%. The Canada S&P/TSX composite index fell 0.6%, around 19,530, on Wednesday after two sessions of gains as investors digested comments from Federal Reserve Chairman Jerome Powell. As expected, the Fed raised its fund's rate by 25 basis points to curb inflation despite the banking crisis. Domestically, yesterday's Canadian CPI came in below expectations, boosting hopes that Canadian banks' borrowing costs have peaked. As a result, financials (-0.8%), energy producers (-1.4%), and miners (-1.4%) posted losses. Meanwhile, real estate companies fell more than 1% as the latest data from Statistics Canada showed new home prices continued to fall. London stocks fell in early trade and closed up 0.4% at 7,567 on Wednesday. Investors digested higher-than-expected domestic inflation data and assessed its impact on the Bank of England's monetary policy. UK consumer prices rose by an annualized 10.4% in February, well above expectations for a 9.9% increase and unexpectedly accelerating from 10.1% in the previous month. The result bolstered the case for further monetary tightening at the Bank of England's meeting tomorrow, with its key interest rate expected to rise by 0.25 percentage points. Meanwhile, improving global financial conditions could translate into a 25 basis point rate hike by the Fed after today's close. Banks were among the session's winners, extending a rebound after a sharp sell-off in the previous week, with HSBC up 1.9%. On the other hand, real estate companies closed lower. The ruble-based MOEX Russia index pared losses to close 0.2 percent lower at 2, near a six-month high. Gazprom shares fell 0.6%, extending yesterday's losses, but were still 3% higher than last week. St. Petersburg Bank rose 10%, sending financial stocks sharply higher. European stock indexes attempted a third straight session of gains on Wednesday, with the DAX up 0.4% and the STOXX 600 up 0.3%, although gains were capped by caution ahead of the Federal Reserve's interest rate decision later in the day. Meanwhile, traders digested higher-than-expected UK inflation data, adding to bets that the Bank of England will have to keep raising rates to rein in high inflation. Financials were the best-performing sector, with banks trading in the green after posting their biggest gains since October the previous day. On the other hand, real estate, utilities, and basic materials were the worst performers. The CAC 40 was flat on Wednesday, falling near 7,106, in line with regional peers, as investors await the Federal Reserve's monetary policy decision due today. Among individual stocks, Unibail-Rodamco (-3.5%), TotalEnergies (-1.1%), and Airbus (-0.8%) were the biggest losers. Conversely, Laurel (+0.8%) has improved the most. Also, banking stocks are in the green: Crédit Agricole (+0.8%) and BNP Paribas (+0.7%). Domestically, French President Emmanuel Macron said there would be no government reshuffle, new parliamentary elections, or a referendum on pension reform. The FTSE MIB traded cautiously around 26,580 on Wednesday after two days of gains, hours ahead of the US Federal Reserve's monetary decision. Markets expect the Federal Reserve's monetary policy tightening to slow, even as inflation remains out of control due to financial market turmoil linked to the banking crisis. Meanwhile, the latest UK inflation data showed persistent inflationary pressures. Among the major stocks in Milan, Terna (-1.6%) and Azimut Holding (-1.2%) led losses; Finecobank (+1.6%) and Nexi (-0.8%) were the biggest gainers. Elsewhere, utility Hera's stock rose 0.7% after the publication of its 2022 accounts. Meanwhile, markets do not appear to be rewarding Telecom Italia after it struck a deal with unions to cut up to 2,000 jobs in Italy through a voluntary early retirement scheme to streamline domestic operations (-0.5%). On Wednesday, the Nikkei 225 rose 1.8% to close above 27,400. In comparison, the broader Topix rose 2% to close at 1,967 in post-holiday trade, erasing losses from earlier in the week and following the Wall Street rise on hopes that the worst of the banking turmoil is over on expectations that the Federal Reserve will tighten policy less aggressively. U.S. Treasury Secretary Janet Yellen said the government would take further action to protect deposits. At the same time, the Fed is expected to raise rates more modestly by 25 basis points, given easing inflationary pressures and the recent banking crisis. As a result, financial stocks rose strongly, including Mitsubishi UFJ (3.1%), Sumitomo Mitsui (2.8%), and Mizuho Financial (3%). All other sectors also rose, with index heavyweights such as Keyence (3.2%), Nippon Yusen (3%), and Sony Group (1.4%) making notable gains. Hong Kong stocks rose 332.67 points, or 1.73%, to 19,591.43 on Wednesday, rebounding for the second consecutive session, near a two-week high, after another strong session on Wall Street boosted stocks on Monday, as U.S. Treasury Secretary Yellen said the government was prepared to protect small Fears of a banking crisis receded further after bank depositors. Locally, overnight borrowing costs in Hong Kong plunged 175 basis points to 2.4% today after reaching their highest level in at least 17 years on Tuesday at 4.41%. In China, developer Evergrande Group is set to unveil a restructuring proposal for its $27 billion offshore debt amid an ongoing property slump. Traders are now waiting to see if the Fed will stick to its hawkish line to curb sticky inflation or pause rate hikes. Financials rose about 2.5%, followed by real estate, consumer goods, and technology. Wharf real estate investment surged (5.7%), followed by BYD Electronics (5.4%), AIA Group (3.6%), China Unicom (3.3%), and China Overseas Land (2.8%). New Zealand shares closed up 55.63 points, or 0.48%, at 11586.93 on Wednesday, snapping two days of losses while trying to shake off a four-month low hit earlier this week. Wall Street's long rally on Tuesday was buoyed by fears of turmoil in the banking sector, which further subsided after Treasury Secretary Janet Yellen said the U.S. government was willing to take further action to protect deposits. Meanwhile, investors braced for the outcome of the Federal Open Market Committee meeting later today. The CME FedWatch tool shows that the market currently sees about a 14% chance of the central bank not raising interest rates and about an 86% chance of raising rates by 25 basis points. Technology, healthcare, and consumer durables, while financials were weak, led to gains. The market's largest stock, Fisher & Paykel Health, rose 1.7%, followed by Ebos Group (1.9%), Spark New Zealand (1.2%), Restaurant Brands (4.7%), and KMD Brands (4%). The S&P/ASX 200 rose 1% to around 7,024 on Wednesday, its second straight session of gains, buoyed by Wall Street's positive lead on hopes that the worst of the banking sector turmoil is behind us and the Fed is expected to tighten policy less aggressively. The Reserve Bank of Australia also said it would reconsider its rationale for suspending its April meeting to reassess the economic outlook, according to the minutes of its policy meeting released on Tuesday. Financial stocks led the gains, with Commonwealth Bank (2.2%), Macquarie Group (1.9%), and ANZ Banking Group (1.9%). The India BSE Sensex rose 140 points to close at 58,215 on Wednesday, extending the previous session's rally and building on Wall Street's closing gains, with bank stocks continuing to rise. Indian banks tracked U.S. banks' gains after Treasury Secretary Janet Yellen pledged to protect consumer deposits above the current FDIC threshold, sending Bajaj Finserv, Bajaj Finance, and Indus Bank up between 3.2% and 1.2 percent on the session. Reassurance from the financial sector also supported risky tech firms trading in Mumbai, with TCS and Tech Mahindra closing in the green. Meanwhile, investors await the Federal Reserve's policy decision before tomorrow's market opens. Brazil's Ibovespa closed 0.8% lower, around 100.170 on Wednesday, a low not seen since late July 2022, as investors weighed the Federal Reserve's policy decisions pending Brazil's central bank. The US Federal Reserve made a 25 basis point rate hike due to the recent turmoil in the banking system. Domestically, Brazil's central bank is expected to leave the Selic rate stable at 11.75% for the fifth consecutive meeting. Traders have been monitoring signals about the path of future interest rates and the economic outlook. Heavyweight Petrobras fell 0.3% on lower oil prices and news of diesel price cuts, while miner Vale fell 1.1%, mainly on oil ore and iron devaluation. Among individual stocks, BRF (-6.8%), Vibra (-6.4%), and Sendas (-6.8%) were the biggest losers, while MRV jumped 4.6%, followed by Eztec (+4.6%).   Reviewing the last economic data: Reviewing the latest economic  news, the most critical data is: - US: In March 2023, the Fed raised the Fed funds rate by 25 basis points to 4.75%–5%, matching the increase in February and pushing borrowing costs to their highest level since 2007 amid rising inflation. The decision aligned with most investors' expectations, although some argued the central bank should pause its tightening cycle to support financial stability. The Fed noted that the U.S. banking system is sound and resilient. Nevertheless, recent developments could tighten credit conditions for households and businesses and weigh on economic activity, employment, and inflation. Meanwhile, the Fed funds rate is expected to hit 5.1% this year, the same as in December, and slightly higher at 4.3% by the end of 2024 and 4.1% in 2025, the same as last December. The PCE inflation forecast was revised this year (3.3% vs. 3.1%) but held steady in 2024 (2.5%). As a result, economic growth will slow slightly in 2023 (0.4% vs. 0.5%) and next year (1.2% vs. 1.6%). - US: For the week ended March 17, 2023, the average U.S. contract rate for 30-year fixed-rate mortgages with eligible loan balances ($726,200 or less) decreased 23 basis points to 6.48 percent, the second consecutive weekly decline of 11 percent. The biggest drop since mid-January Borrowing costs is now at their lowest level almost a month after turmoil in the banking sector sent U.S. Treasury yields lower. Mortgage rates, however, remain well above the 4.5% they were a year ago. Meanwhile, U.S. Treasury yields rebounded from March 20 as concerns about the health of the global financial system eased amid government intervention to boost confidence. - U.S.: U.S. mortgage loan applications rose 3% for the week ended March 17, 2023, the third straight week of growth, according to the Mortgage Bankers Association. Applications to refinance home loans increased by 4.9 percent, and applications to buy a home increased by 2.2 percent. Meanwhile, the average contract rate for 30-year fixed-rate mortgages with qualifying loan balances ($726,200 or less) fell 23 basis points to 6.48%, the second straight weekly decline and the biggest drop since mid-November. Borrowing costs are now at their lowest level in almost a month after turmoil in the banking sector sent - U.S. Treasury yields lower. Mortgage rates, however, remain well above the 4.5% they were a year ago. In February 2023, Russia's producer prices fell by 7.5% year-on-year, the fourth consecutive decline and the fastest since May 2020, when the epidemic caused energy and commodity prices to plummet. In addition, producer prices in the mining and extractive sectors fell sharply (-26.3% vs. -18.7% in January) as Russian commodity prices fell due to sanctions from Western countries and a slowdown in Asia. On the other hand, the cost of manufactured goods fell by a smaller margin (-3.9% vs. -2.7%), while inflation slowed at suppliers of electricity, gas, steam, and air conditioning (8.5% vs. 14%). Still, producer prices rose 0.9% on a monthly basis, the first increase since April 2022, after falling 0.9% in January. - CA: In February 2023, new home prices in Canada fell 0.2% from the previous month, extending January's decline by the same amount. It marked the sixth month that new home prices have not risen, as the Bank of Canada's tightening action put upward pressure on mortgage costs and negatively impacted demand for property. Prices were largely unchanged or lower in 25 of the 27 census tracts. On an annual basis, the cost of new homes rose 1.4 percent, slower than a 2.7 percent increase in the previous month. In addition, the Canada Mortgage and Housing Corporation reported a 44.1 percent increase in unsold new single-family homes compared to last February. - UK: The Confederation of British Industry survey showed that the total balance of orders in March 2023 fell to -20 from -16 in the previous month, the lowest level since February 2021 and below market expectations of -15. Also, export orders fell to -23 from -27. Meanwhile, the CBI's expected selling price index fell to +25 in March, the lowest level since March 2021, from +40 in February, but still strong from a historical perspective. "Falling output and weak orders underscore the challenging demand environment for UK manufacturing," said Anna Leach, deputy chief economist at the Confederation of British Industry. "Combined with some relief in input costs, this appears to have contributed to a significant softening of sales price expectations for the next quarter." - UK: U.K. stocks were set to open lower on Wednesday as investors reacted to data showing inflation unexpectedly jumped in February as food and energy bills continued to rise, supporting the Bank of England's case for further monetary tightening. The country's annual inflation rate increased 10.4% year-on-year in February, up from 10.1% in January, beating expectations for a 9.9% growth. Investors now look ahead to the Bank of England's interest rate decision on Thursday. FTSE 100 futures were down 0.2% in premarket trade. - UK: UK annual inflation unexpectedly edged slightly to 10.4% in February 2023 from 10.1% in January, the first increase in four months, compared with a forecast of 9.9%. The greatest upward pressure came from the cost of food and non-alcoholic beverages (18%, the highest since August 1977, compared to 16.7%), mainly due to shortages of salads and other vegetables, bad weather in southern Europe and Africa, and the impact of rising electricity prices; restaurants and hotels (12.1%, the highest since June 1991, when 10.8%); clothing and footwear (8.1% versus 6.2%); and health (6.8% vs. 6.3%). On the other hand, transportation prices (2.9% vs. 3.1%) slowed, especially for motor fuel, furniture (8.7% vs. 9.2%), housing and utilities (26.6% vs. 26.7%), and entertainment and culture (4% vs. 5%). Compared with January, the CPI rose 1.1%, the biggest gain in four months. - AU: Australia's Western Pacific Melbourne Institute Leading Economic Index fell 0.06% in February 2023 after falling 0.12% in the previous month. Meanwhile, the six-month annualized growth rate for the index, which indicates the likely pace of economic activity relative to trend over the next three to nine months, edged up to -0.94% from -1.04% in January, marking the seventh negative report. "Economic growth is just 1 percent in 2023," said Westpac chief economist Bill Evans. "The slowdown reflects the lagged effects of rising interest rates, a severe shock to real wages, bottoming out savings rates, and falling house prices," he added. The latest developments in the global banking system are unlikely to impact Australia's financial system. Still, they would be a further headwind for major advanced economies, notably by reducing the availability of credit and dampening confidence. Westpac's McDermott-Miller consumer confidence index rose to 77.7 in the first quarter of 2023, rebounding slightly from a record low of 75.6 in the previous quarter but still indicating low confidence levels. An index measuring current economic conditions edged up 1 point to 72 as households grappled with soaring living costs and mortgage rates. Meanwhile, an index measuring future economic conditions rose 2.8 percentage points to 81.4, despite Westpac predicting financial stress will become more pronounced. While the economic outlook for the next year rose 0.4 percentage points to -41.1, the outlook for the next five years fell 0.8 percentage points to -10.8.   LOOKING AHEAD: Today, investors should watch out for the following important data: - AUD: MI Leading Index m/m, and CB Leading Index m/m. - CAD: NHPI m/m, and BOC Summary of Deliberations. - USD: Crude Oil Inventories, FOMC Economic Projections, FOMC Statement, Federal Funds Rate, FOMC Press Conference, and Treasury Sec Yellen Speaks. - EUR: ECB President Lagarde Speaks, Current Account, German 10-y Bond Auction, and German Buba President Nagel Speaks. - GBP: CPI y/y, Core CPI y/y, PPI Input m/m, PPI Output m/m, RPI y/y, HPI y/y, and CBI Industrial Order Expectations.   KEY EQUITY & BOND MARKET DRIVERS: Factors affecting the stock and bond markets are currently: - U.S. 10-year Treasury yields fell below the 3.5% mark, nearing Monday's six-month low of 3.3%, as investors digested dovish comments from the Fed and eased expectations of a 25 basis point hike in its funds' rate. The Fed said it was on the verge of pausing tightening in response to recent risks to financial stability as bank failures this month threatened the health of systemic banks. Concerns that higher interest rates could increase crisis risk prompted the FOMC to keep its year-end funds' rate forecast unchanged at 5.1 percent, despite a sharp rise in inflation expectations and a cut in unemployment forecasts. Meanwhile, the yield on the 2-year note fell 20 basis points to below 4%, narrowing the inversion of the yield curve. - U.S. 10-year Treasury yields rose above 3.62%, the highest in a week, as investors turned their attention to the Federal Reserve and moved further away from Monday's six-month low of 3.291%. The central bank is expected to raise rates by 25 basis points later. However, some market participants believe the agency may pause its rate hike cycle due to the recent turmoil in the banking sector. As a result, traders will be keeping a close eye on future guidance, especially with the possibility of terminal rates or more rate hikes this year. Meanwhile, concerns about the banking sector's health have temporarily eased as global authorities quickly restored market confidence. In addition, Treasury Secretary Janet Yellen said the government was prepared to provide additional deposit guarantees if the financial crisis worsened. - UK: U.K. 10-year gilt yields rose to nearly 3.5%, their highest level in a week after an unexpected acceleration in inflation raised expectations for another rate hike from the Bank of England this week. The latest data showed that Britain's annual inflation rate unexpectedly rose to 10.4% in February from 10.1% in January, the first increase in four months, compared with a forecast of 9.9%. Markets expect the Bank of England to raise interest rates by 25 basis points on Thursday after previous estimates suggested the central bank would hold off on raising rates amid the latest turmoil in the banking sector. - IT: Italy's 10-year BTP yield rebounded above 4.1% from a six-week low of 4% hit on March 20, amid limited demand for safe-haven government bonds and a tentative restoration of stability in the global banking sector. In addition to easing fears of a crisis, reassurance in Europe's financial industry has given the ECB more leeway to tighten. As previously promised, the ECB raised its key interest rate by 50 basis points this month. Still, recent volatility has kept the central bank from hinting at another rate hike at its next meeting or announcing a faster pace of quantitative tightening after the second quarter. As a result, the spread between 10-year gilts and bunds narrowed to 175 basis points after hitting a 192-month high on March 15.   LEADING MARKET SECTORS: Strong sectors: Weak sectors: real estate, communication services, utilities, and financials.   TOP CURRENCY AND COMMODITIES MARKET DRIVERS:  Factors in the currency and commodities markets are currently: - GBP: Sterling strengthened above $1.23 on Wednesday, near its strongest level since June 2022, after new CPI data showed inflationary pressures are now stronger than expected and a dovish Fed tone weakened the dollar. The Fed raised its key interest rate by 25 basis points, as expected by the easing in financial markets. However, it did not commit to a significant hike due to the risk of economic instability from recent bank failures. Meanwhile, UK consumer prices rose 10.4% in February, well above expectations for a 9.9% rise and unexpectedly accelerating from 10.1% the previous month. Core inflation also beat expectations, erasing hopes that the Bank of England had reached peak interest rates. The Bank of England is expected to raise its key interest rate by 25 basis points tomorrow. - NZD: The New Zealand dollar surged past $0.626, near its highest level since mid-February, as investors dumped the greenback after Federal Reserve Chairman Jerome Powell said policymakers considered pausing rate hikes amid banking turmoil. The Reserve Bank of New Zealand raised interest rates by 50 basis points in its February fix, a widely expected move. The board cited rising inflationary pressures, rising price expectations, and a tight labor market. As a result, the Reserve Bank of New Zealand raised its policy rate by 450 basis points in ten meetings, taking the cash rate to a 41-year high of 4.75%. - JPY: The yen rose to 131 against the dollar, its highest in five weeks, after the Fed raised interest rates by 25 basis points as expected, but Fed Chairman Jerome Powell told a news conference that the pause was in response to the banking crisis. On the domestic front, minutes from the Bank of Japan's January meeting showed that members reiterated the need to maintain the ultra-loose policy. Reaching the 2% inflation target sustainably and stably will take time. The Bank of Japan kept its ultra-low interest rate policy on hold this month at its final policy meeting before Governor Haruhiko Kuroda retired. - EUR: The euro strengthened to near $1.09, its highest level since early February, as investors digested the latest FOMC meeting. As most analysts expected, the Fed raised rates by another 25 basis points, although the tone was more dovish. The Fed is expected to hike rates another 25 basis points in May before pausing tightening. In Europe, however, ECB President Christine Lagarde said inflation was still too high, and a strong strategy was crucial. The president added that returning inflation to 2 percent in the medium term is non-negotiable, reinforcing bets for higher interest rates and faster quantitative tightening despite recent turmoil in financial markets. The central bank raised its key interest rate by 50 basis points at its March meeting, a 350 basis point hike since tightening began. -USD: On Wednesday, the dollar index fell to 102.5 for the fifth straight session, its lowest level since early February. Previously, the Fed raised interest rates by 25 basis points as expected to combat rising inflation, but this indicated that amid the banking crisis, future rate hikes are more uncertain. Meanwhile, the likelihood of the Bank of England continuing to tighten policy increased after UK inflation was higher than expected. In Europe, ECB President Christine Lagarde reiterated that inflation remains high and the central bank is committed to returning it to 2%. - OIL: Brent crude futures surged above $76 a barrel on Wednesday, extending gains for a third session. The latest EIA data showed a surprise rise in U.S. crude stockpiles and large drawdowns of other fuels like gasoline and inventories of distillate fuels. The UK oil benchmark is more than 4% higher this week as US Treasury Secretary Janet Yellen said the government would be willing to take further action to protect deposits. At the same time, the Fed raised rates by 25 basis points and said a pause was being considered in light of easing inflationary pressures and the recent banking turmoil. The market also remains bullish on the outlook for China, as the IEA said the top crude importer is expected to lead a 2 million barrel increase in global daily oil demand this year. On the supply side, according to Russian Deputy Prime Minister Alexander Novak, - WTI: Crude oil futures surged above $70 a barrel on Wednesday, extending gains for a third session. The latest EIA data showed a surprise rise in U.S. crude stockpiles and large drawdowns on other fuels like gasoline and inventories of distillate fuels. The US oil benchmark is up 5% this week as US Treasury Secretary Janet Yellen said the government would be willing to take further action to protect deposits. At the same time, the Fed raised rates by 25 basis points and said a pause was being considered in light of easing inflationary pressures and the recent banking turmoil. The market also remains bullish on the outlook for China, as the IEA said the top crude importer is expected to lead a 2 million barrel increase in global daily oil demand this year. On the supply side, according to Russian Deputy Prime Minister Alexander Novak, - GLD: Gold prices soared past $1,960 an ounce, heading for a one-year high of $1,990 hit on March 17 as investors weighed in on the Federal Reserve's dovish tone in its March policy decision. As vaguely expected by markets, the central bank raised its fund's rate by 25 basis points. Still, it refrained from saying it expects "continuous increases" in borrowing costs to curb high inflation in the US economy. Policymakers eased the urge to lower consumer prices to meet the need for financial stability after bank failures earlier in the month threatened a crisis in the sector and dampened growth expectations. However, the central bank said it still expects further policy consolidation in the near future.   Chart of the day: The Australian dollar rose nearly 1% to $0.67, its highest in almost two weeks after the Fed raised rates by another 25 basis points as expected, but in a more dovish tone, with Fed Chairman Jerome Powell telling a news conference that a pause in rate hikes was considered in response to the banking crisis. In Australia, the Reserve Bank of Australia said it would reconsider its rationale for suspending its April meeting to reassess the economic outlook, according to the latest policy meeting minutes. The minutes also showed that the RBA board considered monetary policy restrictive and uncertain economic outlook. The country's central bank announced a widely expected 25 basis point rate hike at its March meeting, deciding to raise the cash rate for the 10th time in a row and bringing borrowing       Long-term Channel Trading Strategy: - AUDUSD - chart with time-frame (D1); The primary resistance with a potential (consolidation area) is around ( 0.70 ),  and the primary support with a potential (target area) is around ( 0.648 ). Therefore, the next most probable price movement is a (down ) trend (see details on the chart).