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Fed Decision, Brazil Rate Hike, Samsung Chip Warning - What's up in Markets

Published 03/17/2021, 06:31 AM
Updated 03/17/2021, 06:34 AM
© Reuters.

© Reuters.

By Geoffrey Smith

Investing.com -- The Federal Reserve won't change interest rates or the rate of bond purchases, but will issue new guidance and growth forecasts when its two-day meeting ends later. It will also say whether it intends to end or extend a loophole on bank capital requirements that could have a big impact on the bond market in the near term. One central bank that may well hike rates later is Brazil's. Samsung warned that the global chip shortage isn't going away any time soon, and the International Energy Agency played down talk of a new 'supercycle' for oil, reminding everyone that prices are still being propped up artificially by the OPEC+ bloc. Here's what you need to know in financial markets on Wednesday, March 17th.

1. Fed meeting ends; dot-plot, SLR ruling eyed

The Federal Reserve will announce its monetary policy decision at 2 PM ET (1800 GMT), and Chairman Jerome Powell’s press conference will follow half an hour later.

No changes to the rate of asset purchases or to key interest rates are likely, so market attention will focus on the Fed’s guidance – specifically, on whether the ‘dot plot’ of Fed officials rate expectations shift to reflect an earlier tightening of policy than assumed hitherto. The Fed’s current guidance implies no rate hikes until 2024, but the rise in bond yields in recent weeks has implied market expectations of an earlier move.

Also of note: the Fed will decide on whether or not to extend the current exemption for banks from the Supplementary Leverage Ratio as a binding capital requirement, which is due to expire at the end of March. If the exemption is not extended, banks may find themselves less able to make payouts to shareholders, and to absorb the huge volume of Treasury bonds being issued this year.

2. Here's one central bank that will hike

In contrast to the Federal Reserve, which believes that inflation is not a near-term risk, the Central Bank of Brazil meets Wednesday against a backdrop of rapidly rising prices and a sharp loss of confidence in the policies of President Jair Bolsonaro.

The BCB is expected to raise its key rate by 50 basis points to 2.50%, in a bid to stop a slide in the real that has lost over 10% against the dollar in the last three months, as inflation has risen to a four-year high of over 5%.

Brazil’s move is likely to herald a broader shift to tighter monetary policy by emerging market central banks, especially those whose currencies have come under pressure as the dollar has started to strengthen. The central banks of Turkey and Russia are also expected to issue more hawkish guidance this week, even if they do not raise their own key rates.

3. Stocks set to open mixed; UBER gives up fight in U.K.

U.S. stocks are set to open mixed in narrow ranges as volatility dies down ahead of the Fed’s announcement later.

By 6:30 AM ET (1030 GMT), Dow Jones futures and S&P 500 futures were effectively flat, while Nasdaq 100 futures were down 0.2%, reversing Tuesday’s modest gains.

Before the Fed announcement, there will be February data on housing starts and building permits, as well as weekly numbers on mortgage rates and refinancing, one of the first sectors of the economy likely to slow in a rising rate scenario.

Stocks likely to be in focus include Uber (NYSE:UBER), which finally gave up its battle in the U.K. not to treat its drivers as workers, as well as Alphabet (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL), after Google cut the fee it charges app developers to 15% from 30% for the first $1 million they earn through the Google Play store. The move is unlikely to satisfy app developers such as Fortnite publisher Epic Games, which have filed antitrust lawsuits in various jurisdictions against what they see as monopolistic fee structures.

4. Samsung warns of semiconductor shortage

Samsung (KS:005930) warned of a “serious imbalance” in the global market for semiconductors, adding that the problem is unlikely to be solved in the near future.

Co-CEO Koh Dong-jin told the company’s annual shareholder meeting that the company’s foundry in Austin, Texas, is still offline due to reconfiguration after the cold snap that forced it to stop operations last month.

The closure of that foundry, along with other facilities owned by Texas Instruments (NASDAQ:TXN), has aggravated a supply shortage that led Honda to suspend some U.S. production on Wednesday. Toyota said production would also be hit by a shortage of some specialty petrochemicals, in another example of how the pandemic has exposed the fragility of complex global supply chains.

5. IEA plays down talk of supercycle

Crude oil prices edged lower overnight after the International Energy Agency played down talk of a new ‘supercycle’ in its latest monthly report on the state of the oil market. It pointed to still-high levels of inventories (on a historical comparison) and the fact that prices are being supported by the withdrawal of some 8 million barrels a day of output by the ‘OPEC+’ deal.

Advanced economy stockpiles fell for six straight months through January, but were still 63.2 million barrels above their 5-year average and 110 million above year-earlier levels, the IEA said.

U.S. government data on weekly stockpile changes are due at 10:30 AM ET, as usual.

Latest comments

To all you people who think the system is rigged why are you here? It gets tiring after awhile listening to some individuals whining about the the system being rigged, Yet here you are supporting something you believe is phony. Why are you here, why are you buying or selling securities. Why are you going short or long or even talking about it if you don’t believe in it. Why no just do something else that suits you.
lies
All the system is entirely rigged. 100%. All these articles are just story telling. Who has Investing.com in hand ? The people and the banks ? Why the FED people are not elected by people ?
thats at least one way to wake up the sleeping giant..No worry technology creates Enlightenment ...the wrath of the double edge sword. you know not what you create....lol
conspiracy theories are for sheep
"What's up in markets" is right! It was so much easier to make money last year
Powell said full employment, not inflation number. Buy until full employment achieve.
The current situation has been building for years. How much fake money can the FED create? Powell inflated the market to hold it up, but at the same time, commodities(which are the fundamental base of the economy have been inflating too.)Lumber is trading at three times the normal level, raising the cost of the lumber pack for a new home by $24,000. Copper has doubled, so of course wiring the house costs more. Then you have to deal with all the other cost increases. I could go on for pages, but I won't waste your time. Bottom Line: we're in trouble.
well said!
well when you have members of the fed like Kashkari think that he believes inflation is purely psychological  then i think the working  man on the street is  pretty much **** for life. ***//www.minneapolisfed.org/article/2017/why-i-dissented
new houses only. watch for spike in pre-owned
Brazilian bonds are near 9% already for some contracts.. great alternative to stocks.
Poisionous Powell
US 10Y at 1.674! pressure is mounting on Powell and Yellen who knows only to print 💰
Who can help me invest ?
Stonks go down unless feds print trillions and give away to the rich
big money is lying about concerns on interest rates, fed has told us many times they will not raise rates.
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