US Fed Meet Live Updates: Powell-led FOMC likely to hold key rates steady for 4th straight meeting

The UK’s blue-chip index fell on Wednesday, hurt by losses in energy shares and Vodafone, while investors awaited comments from Federal Reserve Chair Jerome Powell after the U.S. central bank’s policy decision later in the day.

The blue-chip FTSE 100 slipped 0.5 per cent, with heavyweights Shell and BP weighing on the index with a one per cent slide, tracking oil prices lower.

UK stocks logged their worst month since October as investors scaled back bets of aggressive interest rate cuts from major central banks, with concerns about China’s slowing economy adding to the gloom.

Oil prices fell on Wednesday, pressured by low economic activity in leading crude importer China and a surprise build in US crude inventories as oil producers ramped up output after following frigid weather earlier this month.

Prices were also pressured after US Energy Information Administration data showed weekly crude inventories rose by 1.2 million barrels last week. Brent crude futures for March, which expire today, fell 78 cents, or about 0.9 per cent, to $82.09 a barrel. 

The more actively traded April contract was down $1.00, or about 1.2 per cent, at $81.50. US West Texas Intermediate crude futures lost $99, or roughly 1.3 per cent, to $76.83. Both benchmarks fell by more than $1 a barrel earlier in the session, according to news agency Reuters.

Euro zone government bonds rallied sharply on Wednesday, sending German yields on their biggest one-day slide in four months, after soft data from both sides of the Atlantic reinforced the view that interest rates are on the verge of dropping.

US data on wage growth and private-sector employment both undershot expectations, which supercharged a rally in short-dated Treasuries that fed into a fresh burst lower for European yields in afternoon trading.

The benchmark 10-year Bund yield, which is heading for its first monthly rise since September, dropped as much as 11.9 basis points, its largest daily fall since late September.

Markets are confident that the Fed and other major central banks will be able to lower interest rates later this year. Saqib believes that any Fed words perceived as less than dovish would not cause the currency to appreciate too much.

Tonight’s stance and seasonal factors may keep the dollar bid. The DXY can go upwards to 104.00 and above, marking a 3.4 per cent gain in 2024 after finding a bottom in the last week of 2023, according to Saqib Iqbal, a financial analyst at Trading.Biz.

Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd:

“Short covering in rate-sensitive stocks ahead of key US Fed policy rate decision and domestic Budget announcement tomorrow triggered a major rally in benchmark indices in a volatile led session. At a time when valuations are looking stretched and global macro concerns such as slowdown in China and geo-political tensions remain high, investors would resort to profit-taking at regular intervals and also bet on select stocks going ahead.”

Sujan Hajra, Chief Economist at Anand Rathi Shares & Stock Brokers underscored that the recent trends indicate a significant softening of inflation in the US, fueling market expectations of a potential rate cut by the Federal Reserve as early as March 2024.

However, considering the stronger-than-expected US economic growth, the robust state of the labour market, and the risk of reigniting inflation by prematurely initiating rate cuts, a rate reduction in March seems unlikely, Hajra said.

Even with the looming possibility of the US economy entering a recession in the latter half of 2024, the Federal Reserve is anticipated to exercise caution, aiming to maintain stable inflation expectations in the US, Hajra added.

US Treasury yields slid Wednesday morning on signs of slowing labor costs and a weaker than expected reading of private payrolls as investors awaited the closely-watched Federal Reserve interest rate decision.

US labor costs rose less than expected in the fourth quarter, leading to the smallest annual increase in two years, the Labor Department said. Private payrolls, meanwhile, increased by 107,000 jobs last month, the ADP National Employment Report showed on Wednesday. 

Gold gained on Wednesday but was on track to snap its three-month winning streak, while markets were glued to the US central bank’s policy rate outlook discussion later in the day.

Spot gold was up 0.4 per cent at $2,045.69 per ounce, while US gold futures rose 0.7 per cent to $2,044.90. Gold has declined 0.8 per cent so far this month after surging to a record peak in December, as traders pared back bets of a March start to US rate cuts, according to news agency Reuters.

Copper prices held steady on Wednesday but came under pressure from data showing contraction in manufacturing activity in China and a stronger dollar ahead of an interest rate decision from the US Federal Reserve later in the day.

Three-month copper on the London Metal Exchange (LME) earlier touched a one-month high of $8,652 a metric ton after data from the exchange showed another drop in inventories of the industrial metal. It was up 0.1 per cent at $8,620 a ton in open official rings.

China’s manufacturing activity contracted for the fourth straight month in January, suggesting the sprawling sector and the broader economy were struggling to regain momentum at the start of 2024.

Private sector hiring in the United States slowed more than anticipated this month, according to data Wednesday from payroll firm ADP, following efforts to cool the world’s biggest economy and tame inflation. In January, the US added 107,000 jobs in the private sector, ADP said, down from a revised 158,000 in December.

Most employment gains were in service-providing sectors including leisure and hospitality, as well as trade, transport and utilities. But other service industries such as information lost positions.

The dollar edged higher on Wednesday, heading for its biggest monthly gain since September, while the yen faced its sharpest monthly drop in almost a year as traders awaited a US rates decision.

The dollar index has gained 2.1 per cent against a basket of major currencies this month as markets lowered expectations on the speed and scale of US rate cuts given strong economic data and caution from central bankers.

On the day, the dollar index was up 0.1 per cent to 103.52, just below Monday’s 103.82 that matched last week’s seven-week high.

Shares globally though registered scant progress ahead of the Fed decision. The MSCI world equity index, which tracks shares in 47 countries, remained flat, just below a recent one-year high. The pan-European STOXX 600 index was last up 0.1 per cent, boosted by robust corporate updates and on track for a sixth straight session of gains and a monthly rise of 1.5 per cent.

Nasdaq futures slid over one per cent on Wednesday, as tech giants Alphabet and Microsoft’s projections for rising AI costs disappointed investors, dragging megacap and chip stocks, ahead of the U.S. policy decision expected later in the day.

Alphabet slumped 5.7 per cent in premarket trading after the company reported holiday-season advertising sales below expectations and projected higher spending this year on items such as servers to power artificial intelligence.

US Fed Meet Outcome LIVE Updates: Main focus will be on FOMC rate decision or on Fed Chair Jerome Powell’s press conference to find cues of FOMC’s stance on rate cut.

This week’s meeting should serve “to confirm that the FOMC has left behind its tightening bias and has more intensely begun the discussion around rate cuts,” Deutsche Bank economists wrote in a note to clients.

US Fed Meet Outcome LIVE Updates: As Fed meeting outcome is likely to come on expected lines, experts’ main focus will be on Fed Chair Jerome Powell’s commentary on the inflation trajectory.

Deepak Jasani, Head of Retail Research at HDFC Securities is of the view that investors will watch the language of the Fed in the policy statement after the end of the central bank’s first Federal Open Market Committee (FOMC) meeting of 2024, and in Fed Chair Jerome Powell’s post-meeting press conference.

US Fed Meet Outcome LIVE Updates: Given the improvement in the US inflation situation, experts are hoping that the central bank would intiate rate cuts starting in May or June. The US job market and inflation situation has improved over the past few months.

“On one hand, inflation numbers continue to surprise to the downside. The Fed’s preferred gauge decelerated to 2.9 per cent in December, crossing below 3 per cent for the first time since early 2021, according to data published Friday. On the other, consumer spending continues to be surprisingly robust. It’s undoubtedly getting a boost from the downdraft in inflation, but the strength still may keep some worried that price pressures could mount once again,” reported Bloomberg.

US Fed Meet Outcome LIVE Updates: Before the announcement of the US Fed meeting, the US stocks finished on a mixed note on Tuesday.

On Tuesday, the Dow Jones Industrial Average rose 0.4 per cent to finish the day at 38,467.31. The broad-based S&P 500 slipped 0.1 per cent to 4,924.97, and the tech-rich Nasdaq Composite fell 0.8 per cent to 15,509.90.

US Fed Meet Outcome LIVE Updates: As most economists are suggesting that the Federal Reserve is likely to hold its key lending rate steady for a fourth consecutive meeting, analysts will be keenly looking for any indication of how soon the US central bank could start cutting rates.

“The data to date has been stunningly good,” KPMG chief economist Diane Swonk wrote in a blog post this week.

US Fed Meet Live Updates: US Fed will announce results on key lending rates on Wednesday. The central bank began its two-day meeting on Tuesday at which policymakers are expected to hold interest rates steady.