Market Insights for Sep. 21: Fed’s Outlook on Global Trends

Market Insights for Sep. 21: Fed’s Outlook on Global Trends

Asia-Pacific markets responded with caution and a degree of apprehension. The U.S. Federal Reserve unveiled its latest stance, hinting at a prolonged period of higher interest rates in market insights.

Projections and Rate Hike Outlook

The central bank foresees a rise in interest rates to 5.60% by the end of 2023, a notable increase from the existing 5.25%-5.50% range. The rate-setting Federal Open Market Committee made a notable adjustment by projecting two cuts in 2024, recalibrating the funds rate to hover around 5.1%.

Australia’s S&P/ASX 200 witnessed a sharp decline of 1.37%, settling at 7,065.2, its lowest level since July 10. In Japan, the Nikkei 225 also experienced a parallel slide, slipping by 1.37% as the Bank of Japan commenced its two-day monetary policy meeting, ultimately concluding at 32,571.03. The broader Topix index witnessed a more moderate drop of 0.94%, concluding at 2,383.41.

Market Performance Across Asia

Further south, South Korea’s Kospi bore the brunt of losses, recording a substantial 1.75% dip, culminating at 2,514.97. Simultaneously, the Kosdaq closed 2.50% down at 860.68, echoing the downward trend and marking its lowest level since July 10. Hong Kong’s Hang Seng index reflected similar sentiments, down by 1.34%. Meanwhile, mainland Chinese markets struggled for the third consecutive day, with the CSI 300 index observing a 0.90% drop, culminating at 3,672.44.

Overnight in the U.S., all three major indices experienced a downturn as investors grappled with the implications of the Fed’s decisions affecting the market insights. The Nasdaq Composite, dominated by tech giants like Microsoft, Nvidia, and Google-parent Alphabet, led the losses, plummeting by 1.5%. Meanwhile, the broader S&P 500 also saw a significant drop of 0.94%. The Dow Jones Industrial Average exhibited a more modest decline, losing 0.22%.

Market Insights: New Zealand’s Economic Surge

In a positive turn of events, New Zealand’s gross domestic product exceeded expectations, registering an impressive 0.9% growth in the second quarter. This figure surpassed the 0.5% growth forecasted by economists. This encouraging growth narrative was further reinforced by a revised 0.0% growth rate in the initial quarter, effectively dispelling concerns of a technical recession. The previously reported figure, which stood at -0.1%, was subsequently revised.

On an annual basis, New Zealand’s GDP witnessed a notable surge, climbing by 3.2%. This was markedly higher than the previous quarter’s 2.9% expansion and comfortably surpassed the 3.1% forecasted by the Reuters poll.

BTS Contract Renewal Impact on Hybe Shares

The market observed a peculiar phenomenon as shares of K-pop agency Hybe encountered a dip of over 4% in early trade. This decline transpired despite the noteworthy announcement that all members of the immensely popular boy group BTS had successfully renewed their contracts with Bighit Music, a subsidiary of Hybe. Intriguingly, this share price descent aligned closely with the broader trend witnessed in the Kospi index, which experienced a 1.07% decline on the same day.

Since their debut in 2013, BTS has emerged as a global cultural phenomenon. The decision by all members to renew their contracts in October 2018 signalled a profound commitment to their collective journey. While the label refrained from specifying the termination date of these new contracts, South Korean media outlets cited a statement from Hybe asserting that “all of BTS will be together after 2025”.

Federal Reserve’s Policy Stance and Stock Market Flotation

The Federal Reserve, at the conclusion of its two-day meeting, opted to maintain interest rates at their current levels. However, the central bank notably signalled an expectation for a single additional rate hike before the culmination of the year. Furthermore, it indicated a reduced inclination towards future cuts compared to earlier projections. If this materializes, the impending hike could potentially signify the concluding increment in this particular phase of the economic cycle, as per the Fed’s forecasts.

Future Outlook: Will Tech Stocks Recover?

Amidst escalating risk sentiment, U.S. stock markets experienced a downturn, exerting a ripple effect on Asia’s equity markets. Futures for benchmark indices in Australia and Japan bore the brunt of this sentiment, registering declines. Concurrently, a gauge measuring U.S.-listed Chinese stocks recorded a fourth consecutive session of losses. The tech sector took the lead in these market movements, with the Nasdaq 100 witnessing a notable decline of 1.5%.

Stock Market Predictions 2023: Central Banks’ Policy Announcements

The spotlight now shifts to central banks in the Philippines, Indonesia, and the U.K., poised to announce their respective policy decisions. The Federal Reserve, in its latest decision, maintained its target range at 5.25% to 5.5%. Updated quarterly projections revealed that 12 out of 19 officials favoured another rate hike in 2023. Jerome Powell, Chair of the Federal Reserve, affirmed their readiness to implement further rate hikes if deemed appropriate. He emphasized a commitment to sustaining policy at a level conducive to a controlled economic transition. The central bank’s primary objective remains achieving a “soft landing” for the U.S. economy.

Crude Prices, Bonds, Bitcoin, and Indices Update

Simultaneously, in the commodities market insights, Brent Crude prices ascended above the $93 mark, while WTI Crude comfortably exceeded the $90 threshold. Meanwhile, the yield on the 10-year U.S. bond was recorded at 4.41%. In the realm of digital assets, Bitcoin surpassed the 27,000 level. At 5:04 a.m., the GIFT Nifty, an early indicator of the Nifty 50 Index’s performance in India, exhibited an 8-point or 0.04% increase, settling at 19,958. India’s benchmark stock indices concluded lower for the second consecutive session, a prelude to the U.S. Federal Reserve policy announcement. In intraday trading, the indices experienced a decline of over 1%, marking the most significant drop since August 2. The majority of sectoral indices registered declines, with non-banking financial services, banks, metals, and realty sectors witnessing the most significant contractions.