Fed decision, Samsung, UK inflation – what's moving markets

Fed decision, Samsung, UK inflation – what's moving markets

The Federal Reserve concludes its latest two-day policy meeting later Wednesday, and investors will be closely following events in Washington DC for clues on future interest rate policy.

The U.S. central bank is widely expected to keep interest rates unchanged at today’s meeting, and thus its Chair Jerome Powell’s subsequent press conference and the bank’s new economic projections that will be in focus.

Earlier in March, Powell said the Fed was “not far” from gaining the confidence it needs in falling inflation to start easing rates.

However, last week’s stronger-than-expected inflation reports have led market participants to reduce their bets on rate cuts this year, with traders now pricing in around 75 basis points of easing this year. At the start of the year, traders were pricing in 150 bps of cuts.

This brings the June Fed meeting firmly into the spotlight, with a Reuters poll showing last week that a strong majority of economists believe the Fed will cut its key interest rate then, although the likelihood has fallen close to 53% from a near 60% probability, according to CME’s FedWatch tool. 

U.S. stock futures edged marginally lower Wednesday, handing back some of the previous session’s gains ahead of the Federal Reserve’s latest policy decision.

By 05:00 ET (09:00 GMT), the Dow futures contract was 10 points, or 0.1%, lower, S&P 500 futures had dipped by 7 points, or 0.1%, and Nasdaq 100 futures had fallen by 35 points or 0.2%.

The main indices posted gains on Tuesday, with the blue chip Dow Jones Industrial Average leading the way, gaining 320 points, or 0.8%, its best day since Feb. 22. 

However, there exists some nervous anticipation ahead of the Fed policy decision, amid concerns the recent hotter-than-expected inflation readings will prompt Fed officials to take a more hawkish stance.

The economic data slate is largely empty Wednesday, but there will be quarterly earnings from semiconductor Micron Technology (NASDAQ:MU) and food processing giant General Mills (NYSE:GIS) to digest.

A little of Nvidia’s gold dust rubbed off on Samsung Electronics (KS:005930) on Wednesday, after the Nikkei reported that the U.S. chip designer was considering using the South Korean conglomerate’s high bandwidth memory chips in its artificial intelligence processors. 

Nvidia co-founder Jensen Huang said the firm was in the process of qualifying Samsung’s HBM chips for potential use in the future, the Nikkei reported, citing a press briefing.

Samsung’s shares jumped over 5% to an over 2-month high, in trading on the Seoul exchange earlier Wednesday. 

HBM chips have become a hot topic in AI development, given that they help meet the memory-heavy, high processing speed requirements of running large language AI models.

Nvidia has been one of the main beneficiaries of the AI boom, with its stock up over 80% so far this year. 

Nvidia announced, at its annual developer conference on Monday, its latest chip, the B200 “Blackwell”, which is seen as being 30 times speedier than its predecessor at some tasks.

The Bank of England received a boost Wednesday, as data showed that British inflation cooled in February by slightly more than expected, the day before the central bank announces its latest interest rate decision.

Consumer prices rose by 3.4% in annual terms in February, slowing from a 4.0% increase in January, and below the 3.5% expected.

This was the lowest rate of inflation since September 2021, and offers hope that inflation, which has been persistent for some time, will finally fall back to the central bank’s 2% target in the coming months.

The Bank of England is widely expected to keep interest rates at elevated levels on Thursday, but this data has resulted in slightly increased bets that the BoE will start cutting interest rates in the summer.

Oil prices slipped lower Wednesday, retreating from four-month highs amid caution ahead of the latest Fed policy announcement. 

By 05:00 ET, the U.S. crude futures traded 0.8% lower at $82.06 a barrel, while the Brent contract dropped 0.7% to $86.72 per barrel.

Both benchmarks settled late Tuesday at their highest levels since late October on persistent signs of tight supplies, but a stronger dollar has seen some profit-taking as it makes oil more expensive for investors holding other currencies.

Data from the American Petroleum Institute, released on Tuesday, showed that U.S. crude inventories shrank 1.5 million barrels in the week to March 22, surprising after expectations for a small build. 

The reading potentially marks a second straight week of draws in U.S. inventories, and comes amid increased refinery activity. A sustained drop in gasoline inventories also pointed to improving fuel demand after a winter lull. 

The official inventory data, from the Energy Information Administration, is due later on Wednesday. 

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