MARKET WRAPS

Stocks:

European stocks traded lower on Thursday as investors looked to the Bank of England's likely rate hike and continued digesting the Federal Reserve rate move and Jerome Powell's comments.

"We think that today, just like the Fed, the BOE will be hiking the interest rate for the very last time, and we do not anticipate any other increases in interest rates in the future months or even quarters," Zaye Capital Markets said.

The BOE is expected to follow rate hikes from the central banks of both Switzerland and Norway.

Read Swiss Central Bank Lifts Key Rate, Declares End to Bank Crisis

Read Norway Central Bank Raises Key Rate to 3.0% and Lifts Rate Path

Stocks to Watch

European banks are highly liquid and have a diverse base of funding, but they could see that liquidity start to decline, Deutsche Bank said.

The repayment of liquidity facilities and the decline in central bank balance sheets are likely to tap into excess liquidity, it added.

"Maintaining the same level of excess liquidity but with smaller central bank reserves we expect will be more costly for banks going forward. But it will likely only be a partial offset to the continued benefit of rates rising."

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Siltronic has no material catalysts to look forward to in the coming months as end-market demand remains sluggish, Jefferies said.

Shipment delays caused by high customer-inventory levels and higher costs are weighing on Siltronic's operational performance, and the German manufacturer of microchip parts says it expects a weaker market ahead, it added.

"Medium-term, we remain optimistic, particularly given the growing silicon content in consumer electronics, EVs, and industry, as well as the capacity expansion of semiconductor manufacturers."

Jefferies downgraded its rating on the stock to hold from buy and reduced its target price to EUR75 from EUR95.

U.S. Markets:

Stock futures were firmer as investors reassessed the market's negative reaction to events late in the previous session.

"There's been a bit of calm restored. A big part of it is that the Fed has signaled that they're almost done," Kleinwort Hambros said.

SPI Asset Management said "yesterday's meeting was mainly in line with expectations, with the markets suggesting there is now a 50:50 chance that the Fed could deliver one more 25bp rate hike in May."

"Still, there is elevated uncertainty around this expectation. If financial and credit conditions deteriorate quicker than anticipated and disinflation proceeds faster, the Fed could pause or reverse tack on this tightening cycle."

Stocks to Watch

Coinbase was falling 10.8% in premarket trading after saying it received a "Wells Notice" from the SEC, which warned that the agency's staff had made a preliminary determination to recommend an enforcement action against the crypto exchange.

First Republic Bank was rising 3.5% in premarket trading, while fellow regional lender PacWest Bancorp gained more than 5%.

Economic updates set for release today include the Weekly Jobless Claims, fourth-quarter Current Account, and New Home Sales for February.

Follow WSJ markets coverage here

Forex:

Falls in the dollar could propel the euro rapidly above $1.10, UniCredit Research said.

EUR/USD received a big boost, reaching a seven-week high of 1.0931, according to FactSet.

"This reopens the chance of a relatively rapid test of the year-to-date peak of 1.1033 [in EUR/USD], with no major obstacle in between," Unicredit said.

Once above 1.10, EUR/USD's path towards 1.12--UniCredit's current target for this year--could also be quite smooth, with only 1.1073 as a notable resistance level, it added.

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The dollar hit a seven-week low against a basket of currencies and is likely to stay weak after the Fed raised rates, ING said.

"The dollar weakened on the back of the moderate dovish surprise by the Fed yesterday, and reluctance from the Treasury to consider an extension to the deposit insurance."

Sentiment towards the dollar should stay bearish especially against European currencies, albeit with small corrections high rather than a straight-line dollar depreciation, ING added.

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The BOE may fail to offer much guidance on the future path of interest rates in a decision later, leaving sterling vulnerable to external developments, ING said.

The market is fully pricing in a 25 basis points rate rise for Thursday's meeting and the BOE is likely to be divided over the decision while potentially providing very little policy guidance amid recent market turmoil, ING added.

"Ultimately, the pound may rapidly default to being driven by external factors: primarily the banking situation and global risk sentiment."

Read Sterling to Fall if BOE Signals Pause But Declines May be Limited

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The Swiss franc rose, turning higher on the day against the euro, after the Swiss National Bank raised interest rates despite the Credit Suisse troubles.

Measures taken by Swiss authorities, including the SNB, to rescue Credit Suisse have "put a halt to the crisis," the SNB said in a statement accompanying the rate decision.

Bonds:

Eurozone government bond yields were lower in early trade as investors considered the approaching end of the Fed's interest-rate-rise cycle.

"The effect [of the Fed's rate rise] has been lower market rates, in particular on the front end as the market takes on board that the Fed seems to be almost done," ING said.

ING expects the disinversion of the bond curve to continue, it said, adding that it has seen another material move in that direction as a response to the Fed's decision.

Energy:

Crude futures were slightly lower, having made solid post-Fed gains. Despite the losses, analysts said demand for oil remains strong and is likely to strengthen further.

"The Energy Information Association's weekly report highlighted strong exports, while domestic fuel stockpiles declined," ANZ Research said, adding that Asian demand also remained firm, while the prospect of no more rate hikes this year was providing impetus for oil.

Read Big Oil Eyes New Deals in North Africa Amid Rising Energy Demand

Metals:

Base metal prices were mixed while gold rose more than 1%, as investors reacted to a "dovish" Fed.

"This was a 'dovish hike', i.e., higher rates but with lower projections, " Peak Trading Research said.

The dollar fell following indications from Jerome Powell that fewer or possibly no more rate hikes are set to happen for the rest of this year, a bullish trend for commodity markets, Peak said.

Read Weaker Dollar Should Be a Tailwind for Commodities

DOW JONES NEWSPLUS

EMEA HEADLINES

Swiss Central Bank Lifts Key Rate, Declares End to Bank Crisis

Switzerland's central bank raised its key interest rate Thursday and said the country's bank crisis had ended, the latest sign that policy makers are determined to press down on inflation despite strains in the banking system.

The Swiss National Bank increased its key interest rate by a half-percentage point to 1.5%, a move economists had expected before the banking strains that started in the U.S. spread to Switzerland. The central bank also indicated that it may again raise its key rate later this year.

Norway Central Bank Raises Key Rate to 3.0% and Lifts Rate Path

Norway's central bank raised its key policy rate on Thursday and said that it now expects the rate to peak at a higher level than previously anticipated as inflation remains markedly above target.

Norges Bank increased its key policy rate by 25 basis points to 3.00%, as expected, and said that despite considerable uncertainty about future economic developments, if things turn out as it now expects, the policy rate will be raised further in May.

It Wasn't Just Credit Suisse. Switzerland Itself Needed Rescuing.

ZURICH-The chairman of Switzerland's largest bank received an urgent call last week. On the other end were three top Swiss officials who delivered an ultimatum dressed up as a proposal. UBS Group AG needed to rescue its failing rival, Credit Suisse Group AG.

For any country, it would be a financial emergency. For Switzerland, the stakes verged on existential. Its economic model and national identity, cultivated over centuries, were built on safeguarding the world's wealth. It wasn't just about a bank. Switzerland itself needed rescuing.

Bank of England Expected to Follow the Fed and Raise Key Rate. Inflation Is Still a Worry.

The Bank of England is expected to raise its key interest rate by a quarter point on Thursday, a day after the Federal Reserve increased borrowing costs by the same amount.

The decision comes after weeks of worry about the health of banks that has rocked financial markets worldwide. While that threat to financial stability adds to forces that should bring down inflation, the annual pace of price increases is still in double digits in the U.K.-which gives impetus to the need for BoE Governor Andrew Bailey to tighten policy further.

Deutsche Boerse Doesn't Plan Provisions After US Judgment on Iran Case

Deutsche Boerse AG said it doesn't expect to make provisions after a U.S. court awarded judgement to creditors that sought transfer of around $1.7 billion attributed to Iran's central bank, which the company's subsidiary Clearstream Banking SA held in Luxembourg.

The German exchange operator said late Wednesday that the decision doesn't change the overall risk that would require Clearstream or the parent to make provisions. Clearstream is considering appealing the decision, the company said.

Big Oil Eyes New Deals in North Africa Amid Rising Energy Demand

CAIRO-After years of underinvestment in North Africa's energy infrastructure, global oil-and-gas giants from Halliburton Co. and Chevron Corp. to Eni SpA are ramping up their presence in the region as demand from Europe grows.

Executives in the industry are betting it is worth drilling again in some of the hardest places to do business in the world as Europe increasingly turns to other sources for its energy needs after shunning its main supplier, Russia, over the invasion of Ukraine. In recent months, a string of European officials have visited the region to help advance talks over potential supply deals.

Russia Launches Attacks Across Ukraine, Killing Seven in School Dormitory

Russia launched a new wave of missiles and armed drones into Ukraine, shelling residential buildings in the south and killing seven people in a school dormitory in the Kyiv region, hours after China's president concluded a visit to Moscow to reinforce a partnership with Russian President Vladimir Putin.

Rockets slammed into an apartment block in the southern Ukrainian city of Zaporizhzhia on Wednesday, according to Ukrainian officials and a video of the incident shared by Ukrainian President Volodymyr Zelensky. One person was killed and at least 33, including three children, were injured in the attack, according to local authorities.

Macron Proposes Bonus for Workers in Bid to Calm Pension Protests

PARIS-President Emmanuel Macron stood by his overhaul of France's pension system on Wednesday but proposed several measures for workers-including bonus payments for employees of companies that buy back shares-in a bid to calm an escalating protest movement against his government.

In his first public remarks since pushing through the overhaul last week without a vote in Parliament, Mr. Macron said the law and its centerpiece, raising the retirement age from 62 to 64 by 2030, were needed to fix a pension system that would become unaffordable in a matter of years. He said he wanted the law's provisions to enter into force by the end of this year, defying polls that show the public is largely opposed to the overhaul.

GLOBAL NEWS

Pro Take: The Fed Hits Inflation With Ninth Rate Hike as Banks Reel

The Federal Reserve on Wednesday stuck with its inflation fight as banks and regulators sort out the Silicon Valley Bank mess that has spread fear throughout the banking sector.

Its quarter-percentage-point interest-rate increase, though smaller than most of the hikes seen over the last year, feels like it packs more of a punch amid worries about the health of banks. But Fed Chairman Jerome Powell made clear that the Fed, even though it considered a pause, isn't bowing out of its inflation battle.

Fed Hiked and So Did Silicon Valley Bank

Federal Reserve policy makers raised rates on Wednesday, but they tried to do so in a kind way. Maybe that is the most important takeaway.

The quarter-point increase in the Fed's target range was largely, but not entirely, expected. With all the recent trouble in the banking sector, some economists had forecast the central bank would hit the pause button. Similarly, although interest-rate futures put higher chances on a rate increase than not, they didn't rule out a pause.

Macro Hedge Funds Hit by Financial Turmoil

Hedge funds that bet on big-picture market moves have been hit with steep losses as a spate of recent bank failures upends bets that interest rates would remain elevated.

The souring of the wager led some, including Maniyar Capital Advisors and Haidar Capital Management, to lose more than 20% this month. Many of the funds, which had notched big gains as rates marched steadily upward in 2022, are now flat to down for the year following a steep recent drop in Treasury yields. So-called trend-followers, which try to take advantage of momentum in markets, also were hurt.

What Does 'Made in America' Mean? In Green Energy, Billions Hinge on the Answer.

Virginia-based power company AES Corp. says it is ready to push the button on a solar-panel order of more than $1 billion if a manufacturer will commit to building a factory in the U.S.

If that factory gets built, AES can buy its panels and apply for federal subsidies recently made available to clean-energy developers that use equipment made in the U.S.

Diesel Prices May Reflect Weakness in U.S. Economy

Diesel prices at the pump have fallen to their lowest in over a year. That's good news for consumers, but the decline in prices for the fuel suggests a gloomy outlook when it comes to the U.S. economy.

"Diesel fuel is ubiquitous in our economy," says Brian Milne, product manager, editor, and analyst at DTN. It's a "critical component in industrial production and...supply-chain dynamics."

SEC Plans Lawsuit Against Coinbase, According to Exchange

The Securities and Exchange Commission has told Coinbase Global Inc. that it plans to take enforcement action against the company, escalating its crackdown on digital-currency firms by targeting the biggest U.S. crypto exchange, Coinbase said Wednesday.

Coinbase said it had received a letter from the SEC known as a Wells notice, in which regulators say they believe companies or individuals violated investor-protection laws. The notices aren't final because the agency's commissioners must authorize any lawsuits or enforcement settlements.

Fed Walks Tightrope Between Inflation and Bank Turmoil-but for How Long?

The Federal Reserve is responsible for the financial system and the macroeconomy. In theory, these are different jobs calling for different tools.

The Fed is trying to stay faithful to that separation of roles. On Wednesday, it continued its campaign to slow the economy and bring down too-high inflation, with a quarter-percentage-point increase in interest rates and a forecast of one more. Meanwhile, though, it has been lending generously to banks through its discount window to contain the damage caused by the failure of Silicon Valley Bank two weeks ago.

Grand Jury Weighing Donald Trump Hush-Money Payment Scheduled to Return Thursday

A Manhattan grand jury considering Donald Trump's role in paying hush money to a porn star is scheduled to meet Thursday, according to people familiar with the matter, in what will likely be the panel's last day of deliberations this week as it moves closer to a potential indictment of the former president.

U.S. to Send Aging Attack Planes to Mideast and Shift Newer Jets to Asia, Europe

The U.S. will send aging A-10 attack planes to swap for more advanced combat aircraft in the Middle East as part of a Pentagon effort to shift more modern fighters to the Pacific and Europe to deter China and Russia, U.S. officials said.

The deployment of the A-10s, scheduled for April, is part of a broader plan that also calls for retaining modest naval and ground forces in the Middle East region.

TikTok CEO Seeks to Convince Congress Chinese-Owned App Isn't Security Threat

WASHINGTON-TikTok CEO Shou Zi Chew testifies Thursday morning at a high-stakes congressional hearing, as safety and security concerns over the Chinese-controlled platform deepen even as its popularity in the U.S. grows.

Mr. Chew, a Harvard-educated Singaporean army reservist and former Goldman Sachs banker, will testify before the House Energy and Commerce Committee, whose members have already signaled concerns that Beijing could influence TikTok content and harvest user data.

Ron DeSantis Clarifies Comments on Ukraine War, Calls Russian Invasion Wrong

WASHINGTON-Florida Gov. Ron DeSantis, a likely 2024 Republican presidential candidate, sought to qualify his recent contentious remarks that Russia's invasion of Ukraine was a "territorial dispute" and not vital to U.S. interests.

"Well, I think it's been mischaracterized," he told broadcaster Piers Morgan for an interview to be shown Thursday on the streaming service Fox Nation. Mr. Morgan included the comments in a column Wednesday evening for the New York Post.

Donald Trump Grand Jury Is Called Off for Wednesday

The Manhattan grand jury investigating Donald Trump's role in a hush-money payment to a porn star was instructed not to meet Wednesday, according to people familiar with the matter, delaying any potential indictment of the former president.

The district attorney's office notified court officials Tuesday night about the change in plans, the people said. The grand jury is now scheduled to reconvene Thursday, according to the people. It wasn't clear what prompted the change.

Federal Judge Concludes Trump Likely Misled Lawyers on Documents

WASHINGTON-A federal judge found that special counsel Jack Smith's team presented convincing evidence that President Donald Trump misled his own lawyers about his retention of classified documents after leaving the White House, according to people familiar with the decision.

Judge Beryl Howell made that finding Friday in a sealed decision siding with federal prosecutors in their bid to bypass attorney-client privilege claims raised by one of Mr. Trump's lawyers, Evan Corcoran, and compel him to provide more testimony. Judge Howell wrote that prosecutors had made a "prima facie showing that the former president had committed criminal violations," the people said.

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(END) Dow Jones Newswires

March 23, 2023 07:06 ET (11:06 GMT)

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