Wednesday: 21st March 2018

OPENING CALL: The Australian market looks to open lower with SPI Futures down 8 points.

The Australian dollar has rallied almost one US cent, after the US Federal Reserve raised its interest rate for the first time this year and paved the way for more rate hikes later this year.

Oil futures climbed to settle at their highest level since early February, buoyed by an unexpected weekly decline in U.S. crude stockpiles, as well as ongoing geopolitical risks to global production.
US stocks have ended slightly lower, with major indexes giving up gains in choppy trade after the Federal Reserve raised US interest rates, while a strong gain in the energy space helped limit losses.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market
Australian stocks lagged Wednesday as gains in commodity names was largely offset by declines in health care and REITs. The S&P/ASX 200 rose 0.2% to 5950.3 after having fallen in 4 of the prior 6 days. The energy sector climbed 1.2% on oil’s 2% jump Tuesday. But health care fell 0.6% and REITs shed 0.5% ahead of the Fed’s likely latest rate hike on Wednesday. Hearing-aid firm Cochlear shed 1.8%.
US Markets
 U.S. stocks maintained their gains Wednesday after the Federal Reserve aised interest rates and reiterated plans for two more increases this year.
  The Dow Jones Industrial Average added 0.5%. The S&P 500 climbed 0.3%, while the Nasdaq Composite was up less than 0.1%. Ahead of the announcement, all three indexes swung between small gains and losses for the second straight session following sharp declines to start the week.
  Unease over a pickup in inflation leading to a quicker-than-anticipated pace of rate increases contributed to last month’s stock-market correction. Some investors had feared the Fed would raise rates four times in 2018, but the central bank reiterated Wednesday plans for three total this year. Still, more officials now think four increases might be necessary, and the Fed also marked up slightly the estimate of interest rates it expects to prevail over the long run.
  Some investors worry that higher borrowing costs will slow corporate activity and push up Treasury yields, making stocks less attractive. Wednesday’s Fed statement could comfort some analysts for now who wanted to see the central bank stay on a gradual path.
Commodities
Gold prices extended gains in aftermarket trading Wednesday, after the Federal Reserve took a less hawkish view on monetary policy than some traders were expecting. Gold for April delivery was recently up 1.6% in electronic trading, after closing up 0.7% in regular trading.
  Fed officials said they would increase their benchmark federal-funds rate to a range between 1.5% and 1.75% and penciled in a total of three rate increases for this year, one less than some market participants were positioned for.
Oil Futures
  Oil futures climbed to settle at their highest level since early February, buoyed by an unexpected weekly decline in U.S. crude stockpiles, as well as ongoing geopolitical risks to global production. May West Texas Intermediate crude rose $1.63, or 2.6%, to settle at $65.17 a barrel on the New York Mercantile Exchange. That was the highest settlement since Feb. 2, according to FactSet data. Brent crude for May delivery gained $2.05 per barrel, or 3%, to $69.47.
Forex
The U.S. dollar extended declines after the Federal Reserve meeting.
  The WSJ Dollar Index, which measures the currency against a basket of 16 others, declined 0.4% to 83.78.
  The Fed is widely expected to raise interest rates Wednesday for the fifth time since December 2016. Investors are also looking ahead to the central bank’s forecasts on the path of growth and the pace of future interest-rate increases.
  Tighter monetary policy often attracts investors to a currency by offering higher rates of return. The dollar has weakened against the euro and yen to start the year as the economic outlook for the Europe and Japan has been surprisingly strong, suggesting that the European Central Bank and the Bank of Japan could end their extraordinary monetary
easing.
  The dollar was also pushed broadly lower by concerns that an increase in trade barriers may hurt growth. President Donald Trump’s administration plans to release on Thursday a package of proposed punitive measures aimed at China that include tariffs on imports worth at least $30 billion. Tariffs are bound to cause China to retaliate, said Clement Leung, Hong Kong’s representative in the U.S.
  The dollar fell against both the Canadian dollar and the Mexican peso after a report by the Toronto Globe and Mail that the U.S. is dropping a contentious demand to boost the amount of U.S. and North American parts needed for a car to be exempt from tariffs under the North American Free Trade Agreement.
European Markets
European shares fell 0.16%, or 0.61 points, to 374.96 as the dollar fell against the euro and sterling on nervousness about the timing of U.S. interest rate hikes in 2018.
Germany’s Dax fell 0.01% and France’s CAC-40 dropped 0.3%. Kingfisher was the biggest faller in the Stoxx Europe 600, down 10.5% after reporting a fourth-quarter slowdown in its U.K. business and an uncertain outlook.
Belgian postal operator Bpost ticked up 3.8% after a reported upgrade to buy from hold by Mainfirst Bank.
Asian Markets
There was placid trading in Asia on Wednesday, where early gains softened amid muted trading volumes thanks to the Japanese public holiday.
  Hong Kong’s Hang Seng Index reversed its morning climb and was last down 0.4%. China’s Shanghai Composite Index was down 0.3% and Shenzhen’s tech-heavy composite index was down 0.7%.
  Indexes in Indonesia and India rose by 1% and 0.7%, respectively.

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