US Fed Meeting Live Updates: Recession vs No recession debate heats-up as US reports 0.9% contraction for April-June quarter
US Fed Meeting Live Updates: Recession vs No recession debate heats-up as US reports 0.9% contraction for April-June quarter
US Fed Meeting Live Updates: The July Federal Open Market Committee of the US Federal Reserve begins today. The outcome of the two-day meeting will be announced late on Wednesday by Chairman Jerome Powell. The meeting began at 11:30 pm India time (2 PM Washington, DC).
In line with the expectations, the Federal Reserve increase interest rates by 75 basis points.
The US Federal Reserve has already hiked interest rates by 150 bps in 2022 prior to today's announcements and is expected to raise rates by another 200 bps during the remaining months of 2022, IANS reported. Cumulatively, this would be tantamount to about 350 bps rate hike during 2022, making it the most aggressive rate hike cycle, Acuite Ratings said in a report, this treport said.
Watch Press Conference Live Here:
The FOMC Minutes of the Meeting of July 26-27 will be released on August 17.
Expectations:
Naveen Kulkarni, Chief Investment Officer, Axis Securities has shared his commentary on the market outlook.
Currently, the markets expect a 75 bps hike from the US Fed this week and post that a 50 bps hike in Sept followed by a 25bps hike in November and December to take the Feds Fund rate to 3.25-2.5% by the year-end. These rate hikes are already priced in by the market and any incremental increase this year, apart from the ones mentioned, might be taken negatively by the markets. If the US economy slows down significantly or if commodity prices fall further, there is a possibility that these planned interest rate hikes might not materialize, especially the ones in November and December.
(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)
Latest Updates
US GDP: Economy shrinks 0.9% in April-June, a 2nd straight drop
The U.S. Economy shrank from April through June for a second straight quarter, contracting at a 0.9 per cent annual pace and raising fears that the nation may be approaching a recession.
The decline that the Commerce Department reported Thursday in the gross domestic product the broadest gauge of the economy followed a 1.6 per cent annual drop from January through March.
Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession.
The report comes at a critical time. Consumers and businesses have been struggling under the weight of punishing inflation and higher borrowing costs.
On Wednesday, the Federal Reserve raised its benchmark interest rate by a sizable three-quarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades.
The Fed is hoping to achieve a notoriously difficult soft landing: An economic slowdown that manages to rein in rocketing prices without triggering a recession.
Fed Chair Jerome Powell and many economists have said that while the economy is showing some weakening, they doubt it's in recession.
Many of them point, in particular, to a still-robust labour market, with 11 million job openings and an uncommonly low 3.6 per cent unemployment rate, to suggest that a recession, if one does occur, is still a ways off.
After going backward from January through March, the U.S. Economy probably didn't do much better in the spring.
Forecasters surveyed by the data firm FactSet have estimated that the nation's gross domestic product the broadest measure of economic output eked out a tepid annual gain of 0.8 per cent last quarter. Modest as it would be, that would amount to a sharp improvement over the economy's 1.6 per cent contraction in the January-March quarter.
Some economists fear that GDP actually shrank again from April through June, delivering the back-to-back negative quarters that constitute an informal definition of recession. The Federal Reserve Bank of Atlanta's running estimate of GDP growth, based on available economic data, is signalling a 1.2 per cent second quarter decline.
Most economists, though, point, in particular, to a still-robust labor market, with 11 million job openings and an uncommonly low 3.6% unemployment rate, to suggest that a recession, if one does occur, is still a ways off.
For one thing, the first-quarter economic contraction wasn't as alarming as it looked. It was caused mainly by factors that don't reflect the economy's underlying health: A wider trade deficit, a consequence of Americans' keen appetite for foreign-made goods, slashed 3.2 percentage points from first-quarter growth. And a post-holiday-season drop in company inventories lopped off an additional 0.4 percentage point.
The strength of America's job market, Fed Chair Jerome Powell said at a news conference Wednesday, ?makes you question the GDP data."
The economy posted some encouraging news Wednesday: June reports on the trade deficit (narrower), inventories (higher) and orders for high-priced factory goods (better than expected) suggested that second quarter GDP might turn out to be stronger than previously feared.
Economists at JP Morgan have doubled their forecast for April-June growth to an annual pace of 1.4%.
Even so, recession risks are growing as the Fed's policymakers pursue an aggressive course of rate hikes that, while they may ease in the months ahead, will likely extend into 2023.
The Fed's hikes have already led to a doubling of the average rate on a 30-year fixed mortgage in the past year, to 5.5%. Home sales, which are especially sensitive to interest rate changes, have tumbled.
Some economists have echoed an observation Powell made at his news conference Wednesday: That the economy, looked at as a whole, does not appear to be in the grip of recession. Reuters
Stock Markets Today: Sensex ends 1,000 points up, Nifty closes above 16,900
Benchmark indices ended higher for the second consecutive day on Thursday with Sensex ending 1,000 points up and Nifty ending above 16,900 on back of positive cues from global market after US Fed policy outcome, good earnings in large cap space, partly short-covering and partly investment buying in some segments.India`s blue-chip stock indexes hit a three-month closing high on Thursday, led by a surge in Bajaj Finance and Bajaj Finserv, in the backdrop of the U.S. Federal Reserve raising interest rates as expected.
At the close, Sensex was up 1,041.47 points, or 1.87 per cent, at 56,857.79, and the Nifty 50 was up 287.80 points or 1.73 per cent at 16,929.60. A total of 1,904 shares have advanced, 1,427 shares declined, and 148 shares were unchanged. Bajaj Finance, Bajaj Finserve, Kotak Mahindra Bank, and IndusInd Bank were major gainers on the Nifty.
"Positive cues from global markets following the Fed policy outcome, as well as domestic large caps` upbeat earnings, drove the market rally. The Fed`s decision was as expected, while their positive comment dismissing the possibility of a recession and hinting at a slower pace of rate hikes in the coming months boosted global sentiments," said Vinod Nair, Head of Research at Geojit Financial Services.
Mid cap and small cap stocks ended on a strong note as Nifty mid cap and small rose 0.84 per cent and 0.85 per cent, respectively. Nifty IT and Financials outperformed on the National Stock Exchange.
Apart from this, Asian and European stocks also rose on Thursday on positive comments in Fed`s decision and hint of slower pace of rate hikes in the coming months. All Asian markets and Tokyo stocks closed higher.
Rupee Vs Dollar: Indian rupee sees biggest daily gain in over 2 months post Fed announcements
The Indian rupee saw its biggest single-day gain in more than two months on Thursday, tracking strength in most other Asian peers and shares, while bond yields inched lower after comments from U.S. Federal Reserve Chair Jerome Powell.
Powell sounded suitably hawkish on curbing inflation in his news conference, but also dropped guidance on the size of the next rate hike and noted that "at some point" it would be appropriate to slow down.
India's partially convertible rupee ended trading at 79.7550 compared to its close of 79.8975. It gained 0.2% on the day, its biggest daily rise since May 20.
India`s benchmark 10-year bond yield ended at 7.33%, down 1 basis point on the day.
U.S. Treasury yields edged lower as bonds rallied after the Fed raised rates by 75 bps, in line with market expectations. [US/]
The U.S. dollar slumped to a three-week low versus the Japanese yen and struggled against its other major rivals on Thursday as markets ramped up bets on a softening in the pace of rate hikes.
Expectations From RBI's MPC next week
"We expect the RBI`s monetary policy committee to vote unanimously for a 35 bps rate hike during next week`s policy review meeting," Barclays economists said in a note.
"While inflation is likely to remain elevated in the near term, we think the MPC may acknowledge that price pressures have peaked, and note the favourable tailwinds by reducing its inflation forecasts, albeit marginally."
Traders said they would also be focussing on the central bank`s views on liquidity after the recent tightness in the money markets which has pushed the inter-bank call money rate to above the marginal standing facility rate.
"With inflation drivers easing, I see terminal repo rate in range of 6%-6.25% for now, and a longish period of pause post that," said Akhil Mittar, senior fund manager at Tata Mutual Fund wrote in a note.
"I believe growth situation in India is not as bad as in west (recessionary expectations rising in the west) and RBI might not be immediately pushed to support growth," he added. Reuters
Gold rose on Thursday after U.S. Federal Reserve chair Jerome Powell signalled the central bank could slow the pace of rate hikes in coming months, but a rise in the dollar prompted the metal to pull back from a three-week peak.
Spot gold was up 0.3% to $1,739.45 per ounce by 1146 GMT, after rising as much as 0.8% - its highest since July 8.
U.S. gold futures rose 1% at $1,736.70.
"Gold`s drop from earlier highs has coincided with the dollar also finding a bit of support. I reckon it is due to investors taking profit ahead of U.S. GDP data later on," said Fawad Razaqzada, market analyst at City Index.
The key takeaway from the FOMC meeting is that pace of future hikes will depend on data, which makes it extremely difficult to predict gold`s next move, he added.
The Commerce Department`s advance second-quarter U.S. gross domestic product report is due at 1230 GMT. According to a Reuters survey of economists, GDP growth likely rebounded at a 0.5% annualized rate last quarter.
After the conclusion of the central bank`s policy meet, Powell had said another "unusually large" increase in interest rates may be appropriate at its next meeting in September, but the decision will be determined by the incoming economic data between now and then.
The Fed raised its benchmark overnight interest rate by three-quarters of a percentage point on Wednesday to combat skyrocketing inflation.
"There is an increasing view that the Fed`s hand is being forced into raising rates by events largely outside of their control - and that is supply chain problems," independent analyst Ross Norman said.
Traders have cautiously pared back expectations of further rate rises, as the second quarter GDP figures would provide clarity on the strength of the economy.
Meanwhile, the dollar index reversed course and was up 0.5%. [USD/]
Silver rose 1.2% to $19.36, while platinum fell 0.1% to $885.56.
Rupee Vs Dollar: Indian rupee gains as less-hawkish Powell calms strong rate-hike fears
The Indian rupee gained on Thursday, tracking strength in most other Asian currencies and equities, while bond yields eased after U.S. Federal Reserve Chair Jerome Powell eased trader concerns over continued aggressive monetary tightening.
Powell sounded suitably hawkish on curbing inflation in his news conference, but also dropped guidance on the size of the next rate hike and noted that "at some point" it would be appropriate to slow down.
U.S. Treasury yields edged lower as bonds rallied after the Fed raised rates by 75 bps, in line with market expectations. [US/]
India`s benchmark 10-year bond yield was trading at 7.33% by 0640 GMT, down 1 basis point on the day, while the partially convertible rupee was trading at 79.75/76 per dollar, compared with its close of 79.8975 on Wednesday.
The dollar dropped to a three-week low versus the yen, with the dollar index down 0.3%. [USD/]
Traders said focus will soon shift to monetary policy committee meeting by the Reserve Bank of India (RBI) due next week. Though the broad consensus was for a 50-bps rate hike, views are likely to be tempered after Fed`s decision.
"We now expect the RBI MPC to raise policy repo rate by 35 bps on Aug. 5 and change stance to calibrated tightening," economists at BoFA Securities said in a note.
Investors also expect the rupee to be supported by central bank intervention if there is any depreciation pressure on the local currency in the near term.
A senior source aware of RBI`s decision-making recently told Reuters that the central bank could spend up to $100 billion to protect runaway falls in the rupee.
"RBI might not have used more than $25 billion-$30 billion in defending rupee, given the increasing penchant of the regulator to intervene in NDF/Future markets," State Bank of India said in a recent note.
"Rest of the decline (in foreign exchange reserves) might be purely because of valuation. Enough support for rupee is thus still available," the lender added. ReutersDollar vs yen: USD sinks to 3-month's lows as Fed's Powell less hawkish than feared
The dollar dropped to a three-week low versus the yen on Thursday after Federal Reserve Chair Jerome Powell assuaged investors` worries about continued aggressive monetary tightening.
The U.S. currency sank as low as 135.105 yen, its weakest since July 6 after the Fed raised the benchmark rate by an as-expected 75 basis points to bring it closer to neutral, while noting that although the labour market remains strong, other economic indicators have softened.
The dollar-yen is highly sensitive to shifts in U.S. yields, which slid after Powell said that based on the strength of employment, he didn`t believe the economy was in recession, and that a recession was not necessarily required to tame super-heated inflation.
"The dollar lost a little bit of altitude because I think the market was bracing for the potential of Fed chair Powell to sound a little bit more hawkish," said Rodrigo Catril, a senior FX strategist at National Australia Bank.
"The markets sort of focused on his comments around the fact that we are getting very close to neutral," Catril said. "There`s potential now to slow down the pace of hikes, and the market likes that."
The dollar was last down 0.8% at 135.525 yen.
The two-year Treasury yield, which is especially sensitive to policy expectations, sagged near its lowest level this week at 2.9979%.
It remained about 20 basis points above the 10-year yield though, widely seen as signalling a looming downturn. Reuters
Parth Nyati, Founder, Tradingo on the impact of US fed hike on India
US Fed announced a 75 bps rate hike yesterday which was in line with the market expectations. We believe that the Indian markets have already priced in the hike and the impact is going to be minimal. However, the market expects the rates to stabilize around the 3% levels by the year-end and any negative surprise could be perilous for the global as well as Indian economy.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services
"Even after the 75 bp consecutive rate hike by the Fed and indication that "another unusually large increase would be appropriate in the next meeting" the US markets staged a smart bounce back with S&P 500 and Nasdaq rising by 2.62% and 4.06% respectively. The market seems to be taking cue from the Fed chief's observation that, " I don't think we are in a recession now, the labour market continues to be tight. "
Data - unemployment at 50-year lows and job vacancies at historical highs - seem to support the Fed chief's confidence about the US economy.Asian Markets Updates
Asian shares made cautious gains on Thursday as investors scented a possible slowdown in the pace of U.S. rate hikes, comforting bond markets and sending the dollar to a three-week low on the yen.
As expected, the U.S. Federal Reserve raised rates 75 basis points (bps) to 2.25-2.5% but did note some softening in recent data.
Fed Chair Jerome Powell sounded suitably hawkish on curbing inflation in his news conference, but also dropped guidance on the size of the next rate rise and noted that "at some point" it would be appropriate to slow down. [
"The Fed no longer feel behind the curve and can now assess the appropriateness of policy `meeting by meeting`," said Elliot Clarke, a senior economist at Westpac.
"This is not to say that the rate-hike cycle is complete or even that a pause is coming, but risks look as though they are transitioning from being skewed to the upside to the downside."
The futures market still has 100 bps of further tightening priced in by year-end, but also implies around 50 bps of rate cuts over 2023.
Just the hint of a less aggressive Fed was enough to send MSCI`s broadest index of Asia-Pacific shares outside Japan up 0.5%.
Japan`s Nikkei added 0.3% and South Korea 0.9%. Chinese blue chips firmed 0.6%. Source: Reuters
MCX Gold, Silver Updates
The MCX August Gold futures were trading at Rs 50892 per 10 gram, and were up Rs 172 or 0.34 per cent. Meanwhile, the September Gold futures were trading at Rs 56014 and were up by Rs 1170 or 2.13 per cent.
Indian stock marrkets reponded positively to the US Interst rate hike of 75 bps by the Fed. At 10 am on Monday, both the BSE Sensex and Nifty50 were trading positively. The 30-share Sensex was trading at 56,367.41, up by 551.09 points or nearly 1 per cent from the Wednesday closing level. Meanwhile, the broader market Nifty50 was trading at 16791 and was up 150 points or 0.9 per cent around this time.
US Dollar
The U.S. dollar languished near a three-week low to major peers on Thursday after Federal Reserve Chair Jerome Powell assuaged trader worries about continued aggressive monetary tightening.
The dollar index, which measures the greenback against six counterparts, slid overnight after the Fed raised the benchmark rate by an as-expected 75 basis points to bring it closer to neutral, while noting that although the labour market remains strong, other economic indicators have softened.
Powell said "another unusually large" rate increase could be appropriate at the Fed`s next meeting, but said the central bank`s decisions would be data-dependent and it would not give forward guidance. He also said he didn`t believe the economy was in recession, based on the strength of employment.
"The dollar lost a little bit of altitude because I think the market was bracing for the potential of Fed chair Powell to sound a little bit more hawkish," said Rodrigo Catril, a senior FX strategist at National Australia Bank.
"The markets sort of focused on his comments around the fact that we are getting very close to neutral," Catril said. "There`s potential now to slow down the pace of hikes, and the market likes that."
The dollar index was slightly higher at 106.54 in early Asian trading after dropping 0.59% overnight. Below 106.1 would be the lowest since July 5.
The two-year Treasury yield, which is especially sensitive to policy expectations, sagged near its lowest level this week at 2.9878%, adding further weight on the dollar.
It remained about 23 basis points above the 10-year yield though, widely seen as signalling a looming downturn. Reuters
Zee Business Managing Editor Anil Singhvi's 28th July Strategy:
Global: Positive
FII: Positive
DII: Positive
F&O: Neutral
Sentiment: Positive
Trend: Neutral
Nifty support zone 16575-16625, Below that 16450-16525 strong Buy zone
Nifty higher zone 16725-16800, Above that 16875-16950 Profit booking zone
Bank Nifty support zone 36400-36475, Below that 36250-36350 strong Buy zone
Bank Nifty higher zone 36975-37150, Above that 37325-37500 Profit booking zone
Nifty support levels 16625, 16600, 16575, 16525, 16475, 16450
Nifty higher levels 16700, 16725, 16750, 16800, 16825, 16875, 16950
Bank Nifty support levels 36725, 36600, 36475, 36400, 36350, 36250
Bank Nifty higher levels 36925, 36975, 37050, 37150, 37225, 37325, 37500FIIs Index Long at 45% Vs 36%
PCR at 1.24 Vs 0.99
India VIX down 0.25% by at 18.13
For Existing Long Positions:
Nifty Intraday SL 16425 n Closing SL 16475
BankNifty Intraday SL 36250 n Closing SL 36400For Existing Short Positions:
Nifty Intraday n Closing SL 16800
BankNifty Intraday n Closing SL 37050
For New Positions:
Buy Nifty
SL 16575 Tgt 16700, 16725, 16750, 16800, 16825, 16875, 16950Aggressive Traders Sell Nifty in 16800-16950 range:
Strict SL 17025 Tgt 16750, 16725, 16700, 16650, 16625, 16575, 16525For New Positions:
Buy BankNifty
SL 36400 Tgt 36925, 36975, 37050, 37150, 37225, 37325, 37500Sell BankNifty 37325-37500 range:
SL 37600 Tgt 37225, 37150, 37050, 37000, 36925, 36825, 36750Daily Trading Calls - Anuj Gupta, Vice President (VP), Commodity and Currency Research at IIFL Securities
1) Buy Gold Aug at 50700 SL 50450 TARGET 51100
2) Buy silver Sept at 54700 SL 54200 TARGET 55500
3) Buy MCX COPPER Aug AT 636 sl 630 target 646
4) Buy crude oil Aug at 7750 Sl 7650 target 7900
5) Sell usdinr aug at 80.20 sl 80.40 target 79.90
US Fed Interest Rate Hike - Impact on Bullion
Anuj Gupta Vice President (VP), Commodity and Currency Research at IIFL Securities
As expected Fed decision to increased interes rate by 0.75 point basis was discounted, we saw that gold and silver prices were rose sharply and gold touched $1740 per ounce levels and silver touched $19.04 levels.
They are expected to more agrresive to hike interest rates and would likely need to move beyond this rate to about 3.4% by the end of the year, paving the way for about 100 basis points between now and year-end to curb inflation.
the Nasdaq also increased sharply after the statement Powell said in a news conference that he did not believe the U.S. economy is currently in a recession but that it is softening.
We are expecting that Gold and silver may rise further and Gold may test $1755 levels and Silver may test $19.50 to $20 levels very soon.
Pritam Patnaik, Head Commodities, HNI and NRI Acquisitions, Axis Securities
The US Federal Reserve hiked up its benchmark overnight interest rate by 75 basis points in an effort to bring down the burning inflation under control. The outcome of the meet was widely in expected lines. The Fed also indicated that the central bank could slow the pace and size of future rate hikes if the economy cools. The ongoing increases in borrowing costs against a backdrop of a decelerating economy, is a recipe for an economic meltdown.
The dollar index and bond yields cooled off due to the forward guidance on the rate trajectory, propelling gold prices. A drop of close to 8% in the physical demand in gold did little to dampen the rally, as the precious metal looks to unshackle from the bear grasp.
US Markets Live Updates
1) Dow30 was trading at 32,136, up by 74.50 points or 1.18 per cent at 15:05 pm US Time (12:38 am IST).
2) S&P500 was trading at 4,020.73, up by 99.68 points or 2.54 per cent around this time.
3) NASDAQ COMPOSITE was trading at 12,017, up by 454.40 points or 3.93 per cent.
.
Federal Reserve issues FOMC statement
"Recent indicators of spending and production have softened. Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.
Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lael Brainard; James Bullard; Susan M. Collins; Lisa D. Cook; Esther L. George; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller.".
US Fed Chair Jerome Powell: Unemployment is at a 50-year low.
US Fed Chair Jerome Powell: GDP numbers have the tendency to be revised
US Fed Chair Jerome Powell: Price stability is necessary to stablise labour market conditions
US Fed Chair Jerome Powell: I do not think that US is currentlu under recession
US Fed Chair Jerome Powell: Growth is going to be slowing down through this year
US Fed Chair Jerome Powell: Price Stability is the bed rock of economy. We see that we must do it
US Fed Chair Jerome Powell: More uncertainity now for the times ahead
US Fed Chair Jerome Powell: We will get to the moderatly restrictive level by the end of this year
US Fed Chair Jerome Powell: We will be asking ourselves if we are on the path to achieve the 2% inflation rate
US Fed Chair Jerome Powell: We have been sayng that we will be moving aggressively to remain at neutral levels
US Fed Chair Jerome Powell: We will be looking at incoming data; economic data, inflation-headline and core, labour market data
US Fed Chair Jerome Powell: 75bps was the right magnitude.
US Fed Chair Jerome Powell: We will prepare to move against inflation more aggressively if need be
US Fed Chair Jerome Powell: Every thing we do is for public service
US Fed Chair Jerome Powell: Committed to retain inflation at 2%
US Fed Chair Jerome Powell: Stance of Monetary Policy Committee has become tighter
The US Federal Reserve pted for a hike of 75 bps and flagged concers of weakening economic data, Reuters reported. Details awaited.
Gold Price Today
Gold prices were hemmed into a tight range on Wednesday with investors focused on the outcome of the U.S. Federal Reserve`s policy meeting for signals on its rate hike plans.
Spot gold rose 0.1% to $1,718.91 per ounce by 1607 GMT. U.S. gold futures were little changed at $1,717.00.
Despite gold`s status as an inflation hedge, bullion`s shine dims amid rising interest rates as it is a non-interest yielding asset.
"If the Fed hikes rates by 100 bps (basis points), this might reduce demand for precious metals. But if they stick to a 75 bps hike, then there is chance that gold could see a relief rally," said Jim Wyckoff, senior analyst at Kitco Metals.
With the Fed expected to hike its key interest rate by three-quarters of a percentage point on Wednesday, focus will shift to how deeply signs of an economic slowdown have registered with its policymakers.
"Given the market is priced for a 75 bps hike at this meeting, the focus will be on whether the September meeting will see the pace of hikes slow," TD Securities said in a note. Reuters
Earnings Reports and Guidance from Big US Companies
Wall Street shares gained ground on Wednesday after reassuring earnings reports and guidance from big U.S. companies, while bond yields fell and the dollar rose ahead of an expected Federal Reserve rate increase.
Oil futures rose after a report of lower inventories in the United States while cuts in Russian gas flows to Europe offset concerns about weaker demand and higher U.S. interest rates.
Ten-year U.S. Treasury bond yields - the reference rate for the global cost of capital - were down for the second session in a row but held off lows touched on Tuesday, while several bond market measures continued to signal a potential recession ahead.
The U.S. Federal Reserve is widely expected to deliver another 75 basis-point (bp) interest rate hike and investors will watch Fed Chair Jerome Powell`s news conference for clues on the central bank`s next moves..
Quarterly reports from Microsoft Corp and Google parent Alphabet Inc sparked a relief rally in heavyweight technology and growth stocks after Google ad sales beat expectations, while Microsoft said it was targeting double-digit revenue growth in this fiscal year."I don`t think they`re signalling that we`re out of the water. They`re signalling that they can operate in this type of environment profitably," said Lindsey Bell, chief markets and money strategist at Ally Invest. "It`s making investors feel a little more comfortable that the worst may be behind us." Reuters
US Markets Live Updates
1) Dow30 was trading at 31,887.90, up by 126.35 points or 0.40 per cent at 12:22 AM US Time (9:57 pm IST).
2) S&P500 was trading at 3,978.82, up by 87.77 points or 1.47 per cent around this time.
3) NASDAQ COMPOSITE was trading at 11,875.60, up by 312.74 points or 2.70 per cent.
Dollar Movement
The dollar rose modestly against a basket of major currencies on Wednesday as investors braced for the latest policy announcement from the U.S. Federal Reserve in which the central bank is widely expected to hike interest rates by 75 basis points.
The greenback was weaker earlier in the session but had slowly gained ground to move into positive territory on the day.
Expectations for a 75 basis point rate hike stand at about 87% percent, according tp Refinitiv data, with a roughly 13% chance for an even bigger 100 basis point hike. The central bank is expected to bring the rate up to as high as 3.4% by the end of the year as it attempts to bring inflation under control.
Comments from Fed Chair Jerome Powell will be closely monitored to gauge if the Fed will maintain an aggressive policy stance in the face of weakening economic data.
The dollar index rose 0.168% at 107.310, with the euro down 0.05% to $1.0109.
Expectations for a 75 basis point rate hike stand at about 87% percent, according tp Refinitiv data, with a roughly 13% chance for an even bigger 100 basis point hike. The central bank is expected to bring the rate up to as high as 3.4% by the end of the year as it attempts to bring inflation under control. Reuters
US Markets Live Updates
1) Dow30 was trading at 31,889.10, up by 127.52 points or 0.40 per cent at 10:17 AM US Time (7:51 pm IST).
2) S&P500 was trading at 3,970.08, up by 49.03 points or 1.25 per cent around this time.
3) NASDAQ COMPOSITE was trading at 11,845.60, up by 283.07 points or 2.45 per cent.
RBI Rate HIke:
Even as the US Federal Reseve will announce its monetary policy rates later today, the Indian Central Bank could increase the repo rate by 35 basis points, according to a PTI report.
The Monetary Policy Committee of the Reserve Bank of India (RBI) will meet next week for the August monetary policy.
The Reserve Bank of India's rate-setting panel will go for a 0.35 per cent hike in the key repo rate at its meeting next week, American brokerage Bofa Securities said on Wednesday.
The hike will be accompanied by a change in the policy stance to "calibrated tightening", Bofa Securities said in a report published ahead of the Monetary Policy Committee (MPC) resolution which is set to be announced on August 5.
RBI has hiked the rate by a cumulative 0.90 per cent in two tightening moves in May and June, responding to the runaway headline inflation which has consistently overshot the upper end of the target set for the central bank for many months.
Referring to policy actions since April, when RBI introduced the standing deposit facility, the brokerage said the central bank has effectively hiked rates by 1.30 per cent.
"In our base case, we now see the RBI MPC hike policy repo rate by 0.35 per cent, taking it to 5.25 per cent (higher than pre-pandemic level), with stance change to calibrated tightening from withdrawal of accommodation," the report said.
The brokerage expects MPC to retain its FY23 Consumer Price Inflation (CPI) and real GDP growth forecasts, at 6.7 per cent and 7.2 per cent, respectively.
Last week, RBI Governor Shaktikanta Das said that headline inflation, which came at 7.04 per cent for April, is appearing to have peaked.
There is a possibility for MPC to adopt a more aggressive measure and deliver a 0.50 per cent hike in rates like it did in June, joining some developed market and regional central banks who have sent out more decisive signals.
On the other hand, a 0.25 per cent hike in rates can also not be ruled out, the brokerage said, explaining that MPC could acknowledge that inflation has peaked and there are downside risks to their estimates and there will be measured hikes from here on.
Inputs from PTI
Currency updates:
The euro nursed losses on Wednesday after its sharpest drop in two weeks, as a cut in Russian gas supply sent energy prices soaring, while the dollar held ground ahead of an expected U.S. interest rate hike later in the day.
The euro fell about 1% to $1.0108 overnight, the largest fall since July 11 and was steady in early Asia trade at $1.0139. Europe`s growth remains vulnerable to Russian gas supplies, which have become a major risk since the start of the Ukraine war.
"Energy supply is likely to remain a key issue for the European economy over the coming months," said Kristina Clifton, a currency strategist at Commonwealth Bank of Australia. "The euro can trade below parity, more than just briefly (and) sooner rather than later."
Elsewhere moves have been restrained ahead of the Federal Reserve`s policy announcement due at 1800 GMT. The yen was steady at 136.98 per dollar. The Australian and New Zealand dollars edged marginally higher in early trade, but were kept below Tuesday highs. Sterling hovered at $1.2048.
Analysts said the Australian dollar could rise if inflation data due at 0130 GMT surprises on the upside. Headline inflation is expected to hit a three-decade high of 6.2%. The Aussie was last up 0.2% at $0.6950 and the kiwi rose 0.2% to $0.6243.
Markets have priced in a 75 basis point Fed hike later on Wednesday, with a 13% chance of a supersized 100 bp raise.
Focus will also be on the news conference at 1830 GMT for any hint that policymakers` resolve to hike further is waning as growth slows.
"It`s more of a wait-and-see rather than the expectation of a large surprise," said Galvin Chia, emerging markets strategist at NatWest Markets.
He expects the U.S. dollar to remain supported by safe haven flows over the longer term, amid a darkening global outlook.
"Downside risks to the eurozone growth and broader growth concerns globally tends to suggest more dollar strength," Chia said.
Source: Reuters
Rupee Vs Dollar
The Indian rupee weakened on Wednesday, tracking losses in other Asian peers, while bond yields fell in late trade tracking the downtrend in their U.S. peers ahead of the Federal Reserve`s policy meeting outcome.
U.S. Treasury yields trended lower driven by a flight to safety, following the latest supply cuts in gas supply from Russia to Europe and growing concerns about a U.S. economic slowdown as seen in Walmart`s profit warning.
India`s benchmark 10-year bond yield ended at 7.34%, down 3 bps on the day while the partially convertible rupee closed trading at 79.8975 per dollar compared to its close of 79.78 on Tuesday."The Fed rate hike of 75 bps is largely priced if. If they do a 100 bps, we could see some sell-off in equities tomorrow which could pressure the rupee towards 80 levels," a senior trader at a private bank said.
CWG 2022: Indian squash players hope to excel in Olympic-like events in home away from home. Source: IANS
Gold Outlook by Amit khare, AVP- Research Commodities, Ganganagar Commodity Limited
After a major selloff, gold has been consolidating at the $1,700 an ounce level. And the upcoming Federal Reserve's interest rate decision could be what gives the precious metal its new direction
Gold kicked off the second half of the year on a disappointing note, dropping nearly 6% in July as the U.S. dollar index traded near 20-year highs, with investors fleeing to the greenback for safety.
But, July's Fed decision could be the event gold needs to make its move after touching $1,700 an ounce
Markets expect to see a 75 basis-point rate hike for the second meeting in a row on Wednesday, and if that is the case, gold can continue to make its way above the $1,700 level.
This interest rate decision will decide the next move in bullions, Traders should focus important technical levels given below for the day while trading:
August Gold closing price 50584, Support 1 - 50400, Support 2 - 50200, Resistance 1 - 50730, Resistance 2 - 51000.
September Silver closing price 54715, Support 1 - 54400, Support 2 - 53700, Resistance 1 - 55010, Resistance 2 - 55600.
Gold Outlook by Dr Ravi Singh-Vice President and Head of Research-ShareIndia
Gold prices are slowly pulling upwards amid high inflationary pressure, geo political tensions and global growth worries. The consolidation in gold may continue unless there are fresh triggers, however, gains in US dollar and the expectation of 75 bps rate hike by Fed is keeping pressure on prices.
Buy Zone Above - 50700 for the target of 51000
Sell Zone Below - 50400 for the target of 50100Rupee Vs Dollar - Outlook from Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas
"We expect Rupee to trade on a mixed to negative note on strong Dollar and expectations of an aggressive rate hike by US Federal Reserve today. There are broad market expectations of rate hike by 75 bps. A surprise 100 bps rate hike may lead to Dollar higher and put pressure on riskier assets. Traders may also take cues from FOMC press conference for further guidance on future interest rate hikes. Markets may also take cues from pending home sales and durable goods orders which is expected weaker than previous month. Traders may also remain cautious ahead of the US GDP data tomorrow. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.80 in next couple of sessions.".
USDINR (CMP Rs 79.89 spot): Indian rupee depreciated on overall strength in the US Dollar and concerns global economic recovery. IMF cuts India’s FY23 GDP forecast to 7.4% from 8.2% in the previous estimates, which also weighed on Rupee. Renewed outflows by FIIs also put pressure on Rupee. However, positive tone in the domestic equities cushioned the downside.
Stock Markets Updates
Snapping a two-day losing streak, the Indian market closed strongly ahead of US Federal Reserve meeting outcome on late Wednesday. Benchmarks Nifty50 and Sensex ended almost one per cent higher.
The broader Nifty50 closed above 16,600, while the Sensex jumped around 550 points to close near 55,800.
All sectoral indices sat in the green with Nifty IT, Pharma and Healthcare leading the pack. Sun Pharma gained the most on Nifty50 and 30-share Sensex, while Sate Bank of India, Divis Laboratories, Asian Paints, L&T, TCS, Ultratech Cements, Bajaj Finance, IndusInd Bank and Axis Bank were other leading gainers on the benchmarks.
USD Movement
The dollar edged further away from recent 20-year highs on Wednesday ahead of the U.S. Federal Reserve policy meeting, at which the central bank is expected to raise rates by another 75 basis points to tame soaring inflation.
But moves in currency markets were modest as traders await the policy announcement at 1800 GMT.
Money markets are betting that the Fed will raise rates by 75 basis points (bps), with an outside chance of a larger 100 bps hike. Traders expect the Fed to take the rate to as high as 3.4% by year-end to help bring inflation back to target.
Bets on oversized rate hikes helped push the dollar index to its highest level in almost 20 years earlier this month at 109.29, with the greenback currently up 2.3% in July.
"Markets are taking a bit off the table before tonight`s Fed meeting," said Simon Harvey, head of FX analysis at Monex Europe. "Barring any imminent headlines on European energy or political developments I think we will see very limited ranges."
"We expect that EUR will struggle to move higher while gas prices remain this high," said Colin Asher, senior economist at Mizuho in a note.
Meanwhile, the Australian dollar dropped 0.2% to $0.6926 even as year-on-year core inflation hit 4.9% in June, well above the Reserve Bank of Australia`s target, as the figure was not as high as some investors feared and some rate hike bets were pulled back.
Traders are now pricing in around an 86% chance of a 50 bps rate hike by the RBA next week, and a 14% of a more modest 25 bps hike.
The dollar was flat at 137 yen and against the safe-haven Swiss franc at $0.9628.
In cryptocurrencies, bitcoin was steady at $21,410.
Inputs from Reuters
Stock Markets Live Updates:
BSE Sensex picked up momentum around 2 pm and was trading at 55,644.59, up nearly 0.7 per cent or by 376 points. The 50-share NIfty50 was also trading at 16597.80, 0.7 per cent or by 113 points higher around this time.
August Gold futures were trading at Rs 50667 per 10 gram and were up by Rs 83 or 0.16 per cent on the MCX. Meanwhile, September Silver futures were trading at Rs 54945 per kg and were by Rs 230 or 0.42 per cent around this time.
US Fed Meeting News: How to watch LIVE? Date and Time
"Tomorrow at 2:30 p.m. ET: Chair Powell hosts live #FOMC press conference: https://federalreserve.gov," @federalreserve tweeted on 10:05 PM · Jul 26, 2022.
Quote from Pritam Patnaik, Head - Commodities, HNI & NRI Acquisitions, Axis Securities
Today’s Fed rate decision and the Fed chairman‘s statements will establish the gold rate trajectory in the coming days. While a 75 basis point increase is largely priced in, a surprise increase of 1% or an extremely hawkish statement by the Fed concerning future rate decisions could send gold prices tumbling below the $1700 mark. That said, the market feels given the vulnerable situation that the global economy is currently in, the Fed will choose its words and monetary stance carefully. The Fed is expected to continue to raise rates, but at a gradually diminishing pace coupled with a recession trend globally, which could get gold prices back in focus. Expect gold to remain volatile for the day.
Indian stock markets were trading positively on Wednesday. The 30-share BSE Sensex was trading at 55,506.58, up by 238.09 points or 0.43 per cent from the Wednesday closing level.. Meanwhile, the Nifty50 was also up by 70 points or 0.42 per cent and was trading at 16553.
The August MCX Gold futures were trading at 50582 per 10 gram and were trading nearly flat from the last closing price. Meanwhile, the September Silver futures were trading at Rs 54690 and were down by Rs 25 from the Tuesday closing price.
Rupee Vs Dollar: Indian rupee weakens, bond yields steady ahead of Fed meeting outcome
The Indian rupee weakened on Wednesday, tracking losses in other Asian peers, while bond yields were largely steady as investors awaited the outcome of the U.S. Federal Reserve`s policy meeting where it is widely seen raising rates by 75 basis points.
The partially convertible rupee was trading at 79.87/88 per dollar by 0500 GMT compared to its close of 79.78 on Tuesday.
Most other currencies in Asia too were broadly weaker as investors remained on edge ahead of a highly anticipated U.S. Fed meeting that could determine the path of policy tightening for the region`s central banks.
The Reserve Bank of India too will meet between Aug. 3 and Aug. 5 to decide on rates, with most market participants predicting a 50 basis points hike.
The benchmark 10-year bond yield was trading steady on the day at 7.37%. Source: PTI
Top Developments ahead of FOMC meeting announcements
1) Gold inched up on Wednesday, as the dollar weakened slightly, while investors waited for a key decision on interest rates from the U.S. Federal Reserve which could influence the outlook for bullion, amid growing worries over the state of the economy.
2) FUNDAMENTALS: Spot gold firmed 0.1% to $1,718.97 per ounce, by 0041 GMT, while U.S. gold futures dipped 0.1% to $1,716.70. Spot silver rose 0.4% to $18.68 per ounce, platinum gained 0.3% to $876.22, and palladium firmed 0.4% to $2,017.56.
3) Wall Street equities fell and U.S. Treasuries rallied on Tuesday, a day before a likely Federal Reserve rate hike as investors grappled with growing economic concerns with signs of a looming gas supply crisis in Europe. [MKTS/GLOB]
4) The U.S. central bank is widely expected to raise interest rates by another 75 basis points at the conclusion of its policy meeting on Wednesday.
5) Higher interest rates and bond yields increase the opportunity cost of holding non-yielding bullion.
6) The dollar eased slightly after a sharp rise on Tuesday. A weaker dollar helps gold`s appeal among buyers holding other currencies. [USD/]
7) U.S. consumer confidence dropped to a near 1-1/2-year low in July amid persistent worries about increasing inflation and higher rates, which could undercut spending, pointing to slower economic growth at the start of the third quarter.
8) The global economy is in the grips of a serious slowdown, with some key economies at high risk of recession and only sparse meaningful cooling in inflation over the next year, according to Reuters polls of economists.
Euro fragile as Fed hike looms, gas risks weigh
The euro nursed losses on Wednesday after its sharpest drop in two weeks, as a cut in Russian gas supply sent energy prices soaring, while the dollar held ground ahead of an expected U.S. interest rate hike later in the day.
The euro fell about 1% to $1.0108 overnight, the largest fall since July 11 and was steady in early Asia trade at $1.0139. Europe`s growth remains vulnerable to Russian gas supplies, which have become a major risk since the start of the Ukraine war.
Flows along the Nord Stream pipe from Russia to Germany fell on Tuesday and will drop further on Wednesday.
"Energy supply is likely to remain a key issue for the European economy over the coming months," said Kristina Clifton, a currency strategist at Commonwealth Bank of Australia. "The euro can trade below parity, more than just briefly (and) sooner rather than later."
Elsewhere moves have been restrained ahead of the Federal Reserve`s policy announcement due at 1800 GMT. The yen was steady at 136.98 per dollar. The Australian and New Zealand dollars edged marginally higher in early trade, but were kept below Tuesday highs. Sterling hovered at $1.2048.
Analysts said the Australian dollar could rise if inflation data due at 0130 GMT surprises on the upside. Headline inflation is expected to hit a three-decade high of 6.2%. The Aussie was last up 0.2% at $0.6950 and the kiwi rose 0.2% to $0.6243.
Markets have priced in a 75 basis point Fed hike later on Wednesday, with a 13% chance of a supersized 100 bp raise.
Focus will also be on the news conference at 1830 GMT for any hint that policymakers` resolve to hike further is waning as growth slows.
"It`s more of a wait-and-see rather than the expectation of a large surprise," said Galvin Chia, emerging markets strategist at NatWest Markets.
He expects the U.S. dollar to remain supported by safe haven flows over the longer term, amid a darkening global outlook.
Overnight data showed U.S. consumer confidence falling to a nearly 1-1/2 year low and new home sales slumping, while Walmart shares slid after the retailer issued a profit warning.
Last week European manufacturing data was soft.
"Downside risks to the eurozone growth and broader growth concerns globally tends to suggest more dollar strength," Chia said.
The U.S. dollar index stood at 107.08, not far below mid-July`s 20-year high of 109.290. It gained 0.64% overnight, snapping three straight sessions of declines.
Inputs from Reuters
Gold prices were stuck in a narrow range on Tuesday, as lower Treasury yields amid lingering recession woes offset a firmer dollar, while investors turned their attention to the U.S. Federal Reserve`s two-day meeting, Reuters report said.
Spot gold was flat at $1,719.49 per ounce by 1438 GMT. U.S. gold futures were little changed at $1,719.10, this report said.
U.S. Treasury yields fell sharply, as a looming gas supply crisis in Europe kept the markets on edge about global recession risks, it added.
US Markets ahead of FOMC meeting - world markets at a glance
- DOW 30 was trading at 31,886.20 ay 10:29 am US Time, down by 103.82 points or 0.32 per cent from the Monday closing levels.
- S&P 500 was trading at 3,936.42, down by 30.42 points or 0.77 per cent
- NASDAQ COMPO was trading at 11,618.10 down by 164.54 points or 1.40 per cent
- FTSE 100 was trading at 7,307.53 up by 1.23 points or 0.02 per cent
- DAX was trading at 13,111.80 down by 98.47 points or 0.75 per cent
- NIKKEI 225 was trading at 27,655.20 down by 44.04 points or 0.16 per cent
- SHANGHAI COM was trading at 3,277.44 down by 27.05 points or 0.83 per cent
- NSE NIFTY ended at 16,483.80 down by 147.15 points or 0.88 per cent
- BSE Sensex ended at 55,268.49 down by 497.73 points or 0.89 per cent
Rupee Vs Dollar
The rupee pared its initial gains to settle flat on Tuesday amid muted domestic equities, firming crude oil prices and concerns over the hawkish US Fed.
At the interbank forex market, the local unit opened at 79.73 against the greenback and finally settled at 79.78 (provisional), unchanged from its previous close.
During the day the local unit witnessed an intra-day high of 79.72 and a low of 79.81 against the American currency.
Gold Price Today: Gold is expected to trade in a range-bound manner over the next two days, at least two experts have told Zee Business Web. The two-day US Federal Reserve meeting begins later today and the outcome of the Federal Open Market Committee (FOMC) meeting will be announced on Wednesday. Experts are seeing a 75 bps interest rate hike.
The price movement in gold usually goes to a pause mode just before the policy meeting and there is not much movement, Amit Sajeja, Vice President - Research, Commodity and Currency at Motilal Oswal said.
The rally in MCX Gold futures has stretched a bit far from the lows of Rs 49703 during the last week to 50870 witnessing an 1100 point upward move. He expects some downside from the current levels till the support level of Rs 50300. He said that he sees a range bound movement till Thursday.
It is possible that some correction would come between today and tomorrow as we are already seeing some short covering, he opined.
He recommends profit booking in MCX August gold futures with resistance around Rs 50800. If there is a correction from this level till the support level, a fresh buying can be initiated, he further said. This will give some advantage to the intraday traders, he said.
Gold prices rose on Tuesday on the back of a weaker dollar, but were stuck in a tight range as investors refrained from taking big bets ahead a possible aggressive U.S. interest rate hike.
Spot gold was up 0.3% at $1,724.45 per ounce, as of 0311 GMT. U.S. gold futures gained 0.3% to $1,723.60 per ounce.
The dollar slipped for a fourth straight session, down 0.2% against its rivals, making gold less expensive for buyers holding other currencies.
Anuj Gupta, Vice President (VP), Commodity and Currency Research at IIFL Securities
A 75 bps interest rate hike is expected. The news on the quantum has been there for a while and the markets have discounted this. There will be movement in Gold, Silver and other commodities depending upon developments over the next two days, he said.
Amit Sajeja, Vice President -Research, Commodity and Currency at Motilal Oswal
Expectations of 75 bps and from US Fed rate hike. This is the minimum that is expected, says Sajeja. Markets have discounted for a 75 bps increase. There are also speculations in certain quaters of 100 bps rate hike but that will depend upon what the inflation and growth situation is, he added. But a 100 bps rate hike will be a surprise.
Watch out for the guidance from the US Central Bank on growth outlook and inflation, he adds.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.