Daily market review

United States

Equities seesawed higher Wednesday, after reassuring comments from Federal Reserve Chair Jerome Powell, following a selloff on the initial Fed policy announcement. Equities rallied into the close with the Dow Jones industrial average up 1.6 percent, the S&P 500 up 2.2 percent, and the NASDAQ up 3.8 percent. Gains were broad-based with growth stocks leading.

Equity markets reacted badly and yields spiked, especially at the short end, on news in the Fed's "dot plot" that officials were penciling in six more 25 basis point rate increases this year -- a more aggressive rate path than implied in the last Fed dot plot -- in addition to the as-expected 25 basis point rate increase announced Wednesday. But equities bounced back after Powell said he expected inflation to retreat in the second half of the year, and that he sees recession unlikely.

Investors appeared to focus again on positives that lifted risk assets ahead of the Fed announcement, including lower oil prices and hopes for progress in Russia-Ukraine talks, plus a rebound in Asian markets overnight. Some investors viewed markets as oversold, despite an increasingly desperate situation in Ukraine and widening fallout from the conflict.

Among US stock sectors, best were information technology, consumer discretionary, and financials. The FANMAG stocks provided leadership, along with autos, chipmakers, and reopening stocks including cruise lines, airlines, restaurants, and hotels. Lagging were consumer staples, energy, and utilities.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.26 to US$97.50 while spot gold rose US$13.75 to US$1,928.91. The US dollar was mostly weaker vs. major currencies but higher vs. the yen. Yields on the US Treasury 30-year bond declined 4 basis points to 2.45 percent, and the 10-year note rose 3 basis points at 2.18 percent.


Surging Chinese markets lifted European equities along with weaker oil and hopes for progress toward peace in Ukraine. The Europe-wide STOXX 600 rose 3.1 percent, the German DAX gained 3.8 percent, the French CAC rose 3.7 percent, and the UK FTSE 100 was up 1.6 percent.

European technology stocks led the winners after Chinese tech stocks led a dramatic rally in Chinese markets following official Chinese pledges to bolster their stricken financial markets. Other winning sectors included autos & parts, financial services, banks, and travel & leisure. Defensive sectors lagged, including utilities, telecom, and health care. Oil & gas lagged too, with oil prices down.

Risk appetite earlier got a boost after a series of statements from officials and reports suggested Russia-Ukraine diplomatic efforts were gathering steam. The Financial Times quoted sources close to the Russia-Ukraine talks as saying the two sides had made progress on a 15-point plan including a ceasefire and Russian withdrawal in return for Ukrainian neutrality. The FT noted, however, that it was unclear President Putin would accept the deal, which includes security guarantees from Western powers for Ukraine.

Among the day's best performers were Prosus, the investor, as Tencent, one of its holdings, rallied on Beijing's pledge to boost the economy and ease regulatory curbs on tech stocks. EQT, the private equity firm, rose 12 percent after acquiring Baring Private Equity Asia to boost its exposure to Asia's booming private equity space. BMW, the luxury automaker, rose 4.0 percent despite warning of the hit to its profits from Ukraine and other factors.

Asia Pacific

Asia-Pacific equities rose with Chinese markets leading amid bargain hunting, lower oil prices, and pledges from Chinese authorities to support financial markets.

Chinese equities were already moving higher amid dip-buying and lower oil price in the morning when markets rocketed higher on a series of statements from top Chinese officials pledging to rein in aggressive regulatory measures that have upset financial markets, including a promise to conclude the crackdown on big tech firms and to support overseas listings. The People's Bank of China added its pledge to support efforts to bolster financial markets after a two-day rout. The CSI 300 index surged 4.3 percent and the Shanghai composite jumped 3.5 percent, and Hong Kong's Hang Seng index rallied an eye-popping 9.1 percent.

Japanese markets perked up on falling oil prices and China's stock rally. The Nikkei 225 gained 1.6 percent and the broader TOPIX rose 1.5 percent. Most sectors rose, with automakers, air transportation, services, appliances, and iron & steel best.

The Taiwan Taiex was up 0.1 percent, the South Korean KOSPI gained 1.4 percent, and the Indian BSE Sensex rose 1.9 percent.

Carryover from overnight strength lifted Australian equities with tech stocks leading. The All Ordinaries index rose 1.1 percent. Among other sectors, consumer discretionary, consumer staples, and telecom outperformed too. Travel stocks were also notable winners after New Zealand announced an early reopening of its border for Australians. Energy and materials lagged as commodities were mostly lower.

Looking ahead*

In Asia/Pacific, New Zealand GDP, Japanese machinery orders, Australian labor force survey, Singapore merchandise trade reports, and the Taiwan central bank monetary policy announcement are scheduled. In Europe, the Eurozone HICP and Bank of England monetary policy announcement are due. In North America, housing starts, jobless claims, Philadelphia Fed, and US industrial production reports are on tap.

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