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August 24th - This week, bond investors will be closely watching Federal Reserve Chairman Warshs speech in Jackson Hole. The market is seeking his response to persistent inflation and fiscal issues, and long-term Treasury bonds may face further sell-off risks. Warsh has rarely provided forward-looking policy guidance since taking office in May. His speech following the last monetary policy meeting triggered a massive sell-off in the bond market, highlighting the markets high sensitivity to his speech on Friday. Molly Brooks, U.S. interest rate strategist at TD Securities, said, "I think if he continues to not provide more information, the market will be disappointed, which could further exacerbate the recent sell-off in long-term Treasury bonds." Kathy Bostjancic, chief economist at National Mutual Insurance, said that factors continuing to weigh on the bond market remain, including fiscal concerns, inflation, and market uncertainty about the Feds response. Dhiraj Narula, interest rate strategist at HSBC, said this provides Warsh with an opportunity to reassure investors by clarifying his policy outlook. He said, "In our view, if Chairman Warsh can make some judgments about potential inflationary pressures, it could be enough to reduce the term premium associated with uncertainty."On August 24th, the UKs Office for Maritime Trade Operations (UKMTO) reported that commercial shipping traffic in the Strait of Hormuz continued to decline over the past 48 hours, with shipping activity suppressed and the number of vessels passing through in both directions in single digits. The UKMTO report stated that no confirmed attacks or interference incidents were detected, but noted that Iranian threats and harassment activities persist, including drone overflights, targeted surveillance of merchant ships, and occasional VHF radio calls. These actions "continue to demonstrate Irans intention to maintain a presence along key shipping lanes and to continue to exert pressure on transit vessels." Meanwhile, the UKMTO stated that commercial traffic in the Red Sea and the Bab el-Mandeb Strait has also "continued to decline" following the Houthi blockade of Saudi Arabia on July 20th.The UK Maritime Trade Operations Office (UKMTO) stated that shipping traffic in both the Strait of Hormuz and the Bab el-Mandeb Strait has declined.On August 24, Canadian Ambassador to the United States Mark Wiseman stated that trade negotiations between Canada and the US broke down on the evening of August 22 due to multiple issues, including discrepancies between the written text of a potential agreement and what Canada believed to be the consensus reached between the two sides. In an interview on August 23, Wiseman said that no single issue led to the failure of the negotiations. The breakdown in negotiations subsequently triggered a new round of tariffs and could further escalate the Canada-US trade dispute.Iraqi Prime Ministers Security Advisor: We have proposed to Iran and Saudi Arabia the establishment of a unified security coordination committee.

Hang Seng Index, ASX200, Nikkei 225: Hang Seng Slides on Fed Fear

Alice Wang

Feb 21, 2023 15:39


Market Overview

It was a mixed morning session. There were no US economic indicators from Monday to provide direction, with the US markets closed to commemorate George Washington’s birthday. With no stats to consider, the US futures market, Asian economic indicators, and Fed Fear weighed on the Hang Seng Index and the broader Asian markets.


Fading hopes of a China economic resurgence also weighed on market sentiment this morning.


Private sector PMI numbers for February were in the spotlight today, which failed to drive demand for riskier assets ahead of today’s US PMI numbers.


For the ASX 200 and the Nikkei 225, investor sentiment toward central bank policy outlooks remained headwinds ahead of tomorrow’s FOMC meeting minutes. Amidst hawkish Fed bets, there is uncertainty over the Bank of Japan’s monetary policy outlook as inflationary pressures build.

ASX 200

The ASX 200 was down 0.23% this morning. A bearish end to the week for the Dow Jones and a fall in the Dow mini weighed ahead of economic indicators and the RBA meeting minutes.


Ahead of the RBA meeting minutes, private sector PMIs for February delivered mixed results. While the manufacturing PMI increased from 50.0 to 50.1 in February, the services sector continued to contract. According to prelim figures, the services PMI rose from 48.6 to 49.2.


Following the mixed PMI numbers, the RBA released its monetary policy meeting minutes, which delivered no surprises. Last week, RBA Governor Lowe signaled more interest rate hikes to tackle inflation. According to the minutes,


“Members agreed that further increases in interest rates are likely to be needed over the coming months ahead to ensure that inflation returns to target and that the current period of high inflation is only temporary.”


This morning, bank stocks had a bearish morning. Westpac Banking Corp (WBC) and National Australia Bank (NAB) saw losses of 1.32% and 0.99%, respectively. Commonwealth Bank of Australia (CBA) and ANZ Group (ANZ) also saw red, falling by 0.69% and 0.76%, respectively.


Mining stocks had a mixed session. Rio Tinto (RIO) and Fortescue Metals Group (FMG) were up by 1.22% and 2.92%, respectively, while BHP Group Ltd (BHP) slipped by 0.33%. Newcrest Mining (NCM) was up by 0.63%.


Oil stocks found support, with Woodside Energy Group (WDS) and Santos Ltd (STO) rising by 0.49% and 0.29%, respectively. The gains came despite WTI sitting remaining at sub-$77 this morning.


On the earnings front, BHP Group Ltd released earnings today. A cut in dividend payouts off a slide in profits weighed. The company declared a $0.90 a share. The dividend payout was down from $1.50 a share a year ago.

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