MARKET UPDATE

Asia FX creeps lower, dollar muted as markets brace for Fed rate hike

Most Asian currencies retreated in cautious trade on Wednesday as markets positioned for a likely interest rate hike by the Federal Reserve later in the day, although waning fears of a bank crisis made for small losses in regional currencies.

The Fed is expected to hike interest rates by 25 basis points, given that inflation is still running well above the central bank’s target rate. Markets are pricing in an over 80% chance that the bank will hike rates later in the day, according to Fed Funds futures prices.

But the dollar saw limited support on Wednesday, with the dollar index and dollar index futures falling slightly amid uncertainty over the Fed’s outlook on monetary policy. The two were also trading close to their lowest level in five years.

While concerns over a banking crisis appear to have eased, further raises in interest rates could put more lenders at risk, which in turn could limit the Fed’s ability to tighten policy. But prior to the banking crisis, Powell had espoused a hawkish stance for the central bank amid high inflation and strength in the labour market.

 

Syngenta 4Q profit falls as raw material prices increase

Swiss agrichemicals and seeds group Syngenta on Wednesday reported a 25% drop in fourth quarter earnings due to higher raw materials and energy costs.

Syngenta, which plans to list within the next few months, also spent more on reorganising its business and set cash aside to cover macro-economic uncertainties such as further raw material spikes or potential bad debts by customers.

The Chinese-owned company said its earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 25% to $900 million in the three months to the end of December.

Sales rose 4% to $7.5 billion boosted by strong growth in its seeds business.

“As previously indicated, farmers accelerated their purchases earlier in the year due to supply concerns, moderating fourth quarter growth,” the company said. The spotlight will be firmly on the February jobs report scheduled for Friday and Fed Chair Jerome Powell’s testimony to congress on Tuesday and Wednesday.

 

European stock futures mixed; U.K. inflation climbs ahead of Fed rate decision

European stock markets are expected to trade in a mixed fashion at the open Wednesday as investors digest U.K. inflation data and nervously await the latest Federal Reserve decision on interest rates.

At 03:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.2% higher, the FTSE 100 futures contract in the U.K. rose 0.1%, while CAC 40 futures in France dropped 0.2%.

Sentiment has improved in equity markets across the globe, with U.S. Treasury Secretary Janet Yellen saying she was prepared to intervene to protect depositors in smaller banks helping to soothe nerves.

This followed the rescue of troubled lender Credit Suisse (SIX:CSGN) by its Swiss rival UBS (SIX:UBSG), a deal that was brokered and supported by the Swiss government over the weekend.

The focus now turns to a Federal Reserve interest rate decision later in the day, with the central bank policymakers having to strike a balance between fighting inflation and pacifying a banking crisis.

Investors still widely expect the Fed to hike interest rates by 25 basis points, but there is a great deal of uncertainty over future monetary policy given inflation remains elevated but concerns over the stability of the banking system could limit the central bank’s hawkish stance.

 

 

 

 

 

 

 

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