Markets Mixed after the Fed Hiked Rate

  • Market Overview

Wall Street traded lower after the US Federal Reserve (Fed) hiked its interest rate by 25 basis points to 5% last night, raising borrowing costs to levels last seen in 2007. While the move was in line with most investors' expectations, some hoped the central bank would stop its tightening cycle to ensure financial stability. However, the Fed stated that "the US banking system is solid and resilient, and that recent events are expected to result in tighter lending conditions for families and companies, weighing on economic activity, hiring, and inflation." Meanwhile, the fed funds rate is expected to reach 5.10% this year and to decline to 4% in 2025.

Markets in Europe closed higher on Wednesday even after inflation came in higher than expected. Consumer prices in the UK increased by 10.40% y/y in February 2023, above predictions of 9.90%. This data strengthens the argument for the Bank of England to tighten monetary policy further at its meeting today, with most expecting a quarter-point hike in its benchmark rate.

Hong Kong markets also rose on Wednesday, boosted by another strong performance on Wall Street the day before, as concerns about the banking crisis eased further after US Treasury Secretary Janet Yellen said the government is willing to safeguard depositors at smaller lenders. The Nikkei ended up close to 2% supported by optimism that challenges in the US banking system are over.

The FTSE/JSE All Share Index climbed over 1% as market participants resumed trading from the human rights public holiday. The local currency continued to trade around R18/$ at 21h45 local time. In economic news, South Africa's annual inflation rate rose to 7% in February 2023 from 6.90% in the prior month, the first rise since last October.

Gold traded above $1 970 an ounce at 22h00, while Brent crude traded lower at $72.53 a barrel.

PSG Wealth Daily Investment Update, 23 March 2023

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