Central Banks In Focus: Daybreak Europe 03/20/2024

Summary

The Federal Reserve's decision day is upon us, with traders anticipating the future pace of rate cuts. Asian stocks display a mixed performance following US equities reaching new record highs. The UK awaits the latest inflation data, expected to fall to a two and a half year low. Additionally, the Biden administration is reportedly mulling sanctions on Huawei's Chinese chip network to protect US security, prompting a check on European chipmakers. ECB President Christine Lagarde is set to deliver a significant speech, with market implications expected.

Takeaways

• 📉 The Federal Reserve is expected to keep rates on hold, with the focus on the economic projections and the DOT plots that will be released.
• 🌐 Asian stocks showed mixed results following record highs in US equities, as traders anticipate the Fed's decision on rate cuts.
• 🇪🇺 ECB President Christine Lagarde is set to deliver a significant speech, with market watchers expecting insights into the ECB's future monetary policy.
• 🚫 The Biden administration is reportedly mulling sanctions on Huawei's Chinese chip network, as part of efforts to safeguard US security.
• 📈 US and S&P futures were slightly up, despite the anticipation of the Fed's decision and its potential impact on the markets.
• 🇬🇧 UK inflation data is expected to fall to a two-and-a-half-year low, influencing the Bank of England's upcoming decision on interest rates.
• 🌀 The Japanese yen showed further softness, following the Bank of Japan's decision not to implement further interest rate hikes.
• 📊 Asian markets, excluding Japan, showed positive signs, with Tencent leading the charge due to expectations of double-digit earnings per share growth.
• 🏦 Swiss pharmaceutical company Lonza is acquiring a biologics site in the US from Roche for $1.2 billion, with plans to invest an additional $500 million CHF for upgrades.
• 🛑 US Secretary of State Antony Blinken is visiting Saudi Arabia and Egypt, following aid agencies' warnings of a looming famine in Gaza.
• 🚗 Audi has launched its delayed electric model, the Q6 E-Tron, with the company's CFO expressing cautious optimism about the overall market for EVs this year.

Q & A

What is the main agenda for the Federal Reserve's decision day?

The main agenda for the Federal Reserve's decision day is to determine the future pace of rate cuts, with traders and markets closely watching for any signals on economic projections and balance sheet discussions.

How did Asian stocks perform following the record highs in US equities?

Asian stocks showed a mixed performance following the record highs in US equities, as investors awaited the latest inflation data from the UK and key speeches from central bank leaders.

What is significant about Christine Lagarde's speech this year?

Christine Lagarde's speech is significant because it is one of the most important of the year for the ECB president, where she is expected to address the ECB's stance on future rate cuts and monetary policy.

What is the Biden administration reportedly considering regarding Huawei's chip network?

The Biden administration is reportedly considering sanctioning Huawei's Chinese chip network as part of a campaign to protect US security, targeting firms linked to Huawei and those acting as intermediaries for restricted equipment.

What is the expected outcome of the UK's inflation data release?

The UK's inflation data is expected to show a fall to a two and a half year low, with the CPI expected to drop to 3.5% year-on-year from 4% in the previous month, which could influence the Bank of England's decision on interest rates.

How did the tech-heavy NASDAQ perform in the market?

The NASDAQ, which is tech-heavy, saw solid gains with the megacap seven leading the charge. However, futures were down by a 10th of a percent, possibly due to traders taking a breather ahead of the Fed decision.

What is the current stance of the Bank of Japan on further rate hikes?

The Bank of Japan has shown softness in its stance, with no indication of further rate hikes following its first rate hike since 2007. This has led to continued softness for the Japanese yen in the session.

What is the expectation for Tencent's earnings?

Tencent's earnings are expected to show double-digit growth in earnings per share, driven by the strength from short videos and air-related ads, according to Bloomberg Intelligence.

How is Samsung Electronics' stock performing?

Samsung Electronics' stock surged by the most since about six months following a report that Nvidia is considering buying its high bandwidth memory chips, a crucial component for processors, leading to a nearly 6% rally in its stock.

What is the current situation regarding the US Secretary of State's visit to the Middle East?

US Secretary of State Antony Blinken is visiting Saudi Arabia and Egypt, focusing on the post-war situation in Gaza, potential reconstruction funding, and the pressing issue of getting more aid into the Gaza Strip amidst warnings of a looming famine.

What are the potential scenarios for the Federal Reserve's economic forecasts?

The potential scenarios include a hawkish outlook with two rate cuts for the rest of the year and a press conference where Jerome Powell does not push back against that, a less hawkish outcome with two rate cuts and a dovish Powell press conference, and the most dovish scenario with three rate cuts for the year and a dovish Powell press conference.