Wall Street extended losses on Wednesday, with the S&P 500 down 0.75% and the Nasdaq down 1% as markets reviewed the Federal Reserve's (Fed) monetary policy outlook after the federal funds rate was left unchanged at 5.50%, in line with expectations. According to predictions made on the dot plot, there is a chance of one more increase this year and two cuts in 2024. “Additionally, median projections by FOMC policymakers were revised to average an interest rate of 5.10% by the end of next year, 50 basis points higher than June’s projections. The Summary of Economic Projections also reflected forecasts of stronger GDP growth and lower unemployment by next year, while inflation expectations remained unchanged for 2024,” Trading Economics reported.
European markets traded higher on Wednesday, with the German DAX up 0.75% while the benchmark STOXX 600 added 1% led by gains in auto stocks. On the economic data front, producer prices in Germany fell by 12.60% in August 2023, the largest decline on record, as a result of declining energy prices. UK inflation came in below expectations at 6.70% for August 2023. Economists polled by Reuters expected an increase to 7% annually.
Asian equity markets fell on Wednesday after the People’s Bank of China left its one-year and five-year loan prime rates unchanged at 3.45% and 4.20% respectively. In addition, data revealed that Japan's producer inflation rate increased to a four-month high in August, while the country's trade deficit narrowed significantly. The Shanghai Composite fell 0.52%, while the Nikkei lost 0.66% in regular trading.
The FTSE/JSE All Share Index (ALSI) rose on Wednesday, led by banks and financials. On the economic front, the annual inflation rate for August came in at 4.80%, in line with market expectations. The core inflation figure, which omits food and energy prices, also came in at 4.80% y/y. Local interest rates are expected to remain unchanged. “The Bank is, however, expected to maintain a hawkish stance due to inflation risks skewed to the upside,” Business Day reported. At 20h30, the rand had strengthened 0.93% to R18.74/$, 0.50% to R20.10/€ and 0.85% to R23.23/£.
Brent crude rose above $94 per barrel on Wednesday, hovering close to over 10-month highs after US crude inventories declined by 2.135 million barrels last week, broadly in line with market expectations of a 2.2 million draw. Gold reversed some of its early gains but hovered around $1 940/oz after the US interest rate decision.
