Daily market review

United States

Equities gave up early gains and bond yields rose as Federal Reserve Chair Jerome Powell made hawkish noises in his post-policy announcement press conference, which raised concern that policy-makers may push up rates more rapidly or unpredictably. The Dow Jones industrial average fell 0.4 percent, the S&P 500 declined 0.2 percent and the NASDAQ was flat.

Major indexes were holding gains of 2 to 3 percent shortly after the Fed policy announcement, but fell back into negative territory as the market digested Powell's remarks, including his pledge to be "nimble," and his warning on worsening inflation, which suggested to investors that multiple, rapid rate increases might be needed, and that the Fed might start shrinking its balance sheet after it raises rates at its next policy meeting on March 15-16.

Growth stocks managed to hold up better than value/cyclicals, though the FANMAG group mostly ended down. Microsoft was a big winner, up 2.9 percent, after delivering earnings and revenues beats. In value/cyclicals, banks were mostly better but homebuilders retreated on higher bond yields. Travel & leisure outperformed, with cruise lines better, on hopes for a relatively fast recovery from the Omicron wave.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.55 to US$89.57 while spot gold fell US$30.31 to US$1,817.34. The US dollar was higher vs. most major currencies. Yields on the US Treasury 30-year bond rose 5 basis points to 2.18 percent, and the 10-year note rose 10 basis points at 1.87 percent.


European equities rallied for a second day with bargain-hunting centered in reopening/cyclicals. The Europe-wide STOXX 600 rose 1.7 percent, the German DAX gained 2.2 percent, the French CAC advanced by 2.1 percent, and the UK FTSE 100 was up 1.3 percent.

Among sectors, best were travel & leisure as European governments relax some travel restrictions amid reports that Covid-19 cases are peaking in Europe and the US. Rising commodity prices bolstered miners and oil & gas stocks. Bank stocks outperformed too, with HSBC up 2.6 percent,

Airlines were among the best performers, with Lufthansa up 5.6 percent and EasyJet up 5.2 percent after an analyst upgrade. Vestas Wind Systems was another notable winner, up 5.8 percent after an earnings beat.

Asia Pacific

Asia/Pacific equities were narrowly mixed in quiet trading ahead of the Fed's policy decision. Sentiment got a boost after Ukrainian officials suggested a Russian invasion is not imminent.

Japanese stocks edged down with most sectors lower, led by a selloff in mining stocks. The Nikkei 225 declined 0.4 percent and the Topix slipped 0.3 percent. Sentiment was downbeat as investors focused on rising global bond yields and as Japan expanded its anti-Covid restrictions to more prefectures.

South Korea's KOSPI declined 0.4 percent and the Taiwan Taiex eased 0.2 percent as investors pared risk positions before the Fed news.

Mainland Chinese equities edged up on reports China is considering tax cuts to boost the economy. China's CSI 300 index and the Shanghai composite both rose 0.7 percent. Among sectors, utilities and industrials outperformed while telecom services and health care lagged.

Sectors were mixed in quiet trading in Hong Kong, with the Hang Seng index up 0.2 percent. Oil and gas stocks advanced while health care dropped.

Australia was on holiday.

Looking ahead*

In Asia/Pacific, New Zealand CPI, Hong Kong merchandise trade, and Chinese industrial profits reports are scheduled for release. In Europe, German Gfk survey, Swiss merchandise trade, and UK CBI Distributive Trades reports are due. In North America, US durable goods orders, US jobless claims, US pending home sales, and Kansas City Fed manufacturing reports are due.

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