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BOJ hike, Fed meeting, Nvidia conference, Bitcoin - what's moving markets

Published 03/19/2024, 05:05 AM
Updated 03/19/2024, 05:16 AM
- -- Wall Street futures point to a cautious trading day ahead of the start of the latest Federal Reserve policy-setting meeting, especially after the Bank of Japan lifted its interest rates for the first time in almost two decades earlier in the session. Nvidia continues its annual developer conference, while Bitcoin suffers its largest one-day drop in two weeks..

1. BOJ hikes at start of central bank-denominated week

This central bank-dominated week has started with a bang, as the Bank of Japan hiked interest rates for the first time in 17 years earlier Tuesday, marking an end to nearly a decade of ultra-loose monetary policy.

The BOJ raised short-term interest rates by ten basis points to 0%, and said while it will continue to purchase Japanese government bonds at a "steady" pace, it will end the purchase of riskier exchange-traded funds and real estate investment trusts.

The news from the Reserve Bank of Australia was less dramatic, as this central bank decided to leave interest rates unchanged, as widely expected, though the RBA further watered down its tightening bias.

Attention now turns to the start of the Federal Reserve's two-day policy meeting, later in the session, with its decision set to be announced on Wednesday.

The U.S. central bank is widely expected to stand pat, but the focus will be on its economic projections and how many rate cuts it estimates for the year.

Earlier this month, Chair Jerome Powell said the Fed was "not far" from gaining the confidence it needs in falling inflation to start easing rates.

The Bank of England and the Swiss National Bank also meet this week, on Thursday, and both are also expected to keep interest rates steady.

The BOE is likely to await greater clarity on wage growth, which remains stronger than in the U.S. or the eurozone, before cutting interest rates, while the SNB may choose to wait on the sidelines until the Fed and the ECB start cutting interest rates, widely expected in June, to prevent further weakness in the Swiss franc.

2. Futures marginally lower; Fed to start meeting 

U.S. stock futures traded marginally lower Tuesday, in cautious trading ahead of the start of the Federal Reserve’s latest policy-setting meeting.

By 05:10 ET (09:10 GMT), the Dow futures contract was down 16 points, or 0.1%, S&P 500 futures had dipped by 3 points, or 0.1%, and Nasdaq 100 futures had fallen by 20 points or 0.1%.

The main indices closed higher on Monday, rebounding after a two-week losing streak, but there still exists a great deal of nervous anticipation as the Fed officials get together, especially after the recent release of  hotter-than-expected inflation readings.

Concerns are abound that the sticky inflation readings will prompt the Federal Reserve to signal interest rates will remain higher for longer than expected. 

In the corporate sector, Nvidia will be in the spotlight as the chipmaker continues to host its annual developer conference [see below], while Pfizer (NYSE:PFE) has offloaded a roughly $3.9 billion stake in Haleon, the consumer healthcare firm, bringing down its holding in the British consumer healthcare firm to 22.6%.

3. Nvidia unveils new ‘superchip’

Nvidia's (NASDAQ:NVDA) annual developer conference started on Monday, with Chief Executive Jensen Huang introducing the company's latest chip, the B200 "Blackwell".

He also detailed a new set of software tools to help developers sell AI models more easily to companies that use technology from Nvidia, whose customers include most of the world's biggest technology firms.

The B200 "Blackwell" chip is 30 times speedier than its predecessor at some tasks, Huang noted, and is set to start emerging onto the market later this year.

However, Nvidia stock fell over 1% premarket as these announcements failed to attract new investors given the extent of the rally which has seen the shares surge 240% over the past 12 months, making it the U.S. stock market's third-most valuable company, behind only Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL). 

The conference is set to continue later Tuesday.

4. Bitcoin hits two-week low ahead of Fed 

Bitcoin suffered its largest one-day drop in two weeks Tuesday, as a wave of selling hit cryptocurrencies ahead of the latest Federal Reserve meeting.

At 05.10 ET, Bitcoin was down over 7% at $63,145, having earlier hit a two-week low of $63,108.

The Federal Reserve concludes its latest two-day policy-setting meeting on Wednesday. The central bank is widely expected to keep interest rates unchanged, but it will also hold a press conference to discuss the economy and where Fed rates are likely to go in the future.

A hawkish tone would likely cause risk aversion to the detriment of the most popular digital currency, while an indication of lower interest rates could make traditional investments like bonds and savings accounts less attractive, leading investors to seek higher returns elsewhere, including Bitcoin.

Still, Bitcoin is still showing a 50% gain for the year so far, as investors have piled into U.S. exchange-traded funds backed by spot bitcoin.

And the $150,000 level “now looks likely”, according to British bank Standard Chartered (OTC:SCBFF), reflecting “the more rapid pass-through from ETF inflows to the BTC price to date.”

5. Oil slips back from four-month highs

Oil prices edged lower Tuesday, slipping back from four-month highs ahead of the start of the Federal Reserve’s latest policy meeting. 

By 05:10 ET, the U.S. crude futures traded 0.2% lower at $82.04 a barrel, while the Brent contract dropped 0.2% to $86.69 per barrel.

Both benchmarks reached four-month highs in the previous session, helped by signs of stronger demand and economic growth in both the U.S. and China, the two largest economies in the world.

The market also received a boost after attacks on Russian refineries resulted in a higher geopolitical risk premium, but there has been a degree of profit-taking Tuesday as traders awaited signals on rate cuts from the Fed meeting. 

Beyond the Fed, traders will also be keeping an eye on the latest U.S. inventory data, with the American Petroleum Institute set to release its estimate of crude stocks later in the session.



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