Markets Falling As Yields Rise Ahead of FOMC Minutes

The US Dollar is trading slightly ahead of tonight’s FOMC minutes. Yesterday saw a muted, yet positive, session though the big focus was on the movement we saw in equities markets as asset prices plunged over the day. The fall in stock markets came despite a slew of better-than-forecast PMI readings out of the eurozone, UK and US. These readings were seen as feeding into the narrative of hawkish central bank expectations, driving yields higher and therefore pulling stock prices lower. In the US in particular, further strong data is boosting market pricing for a larger 50bps hike from the Fed in March. Traders will now look to tonight’s FOMC minutes to see if there had been any support for a larger hike last time around.

Key Factors for Today

- USD quiet ahead of FOMC minutes today – hawkish expectations for March fuelled by further strong data
- Equities fall despite PMI beats as yields rally on hawkish central bank expectations
- Walmart shares soar on strong Q4
- AUD sinks in FX – NZD rallies on fresh RBNZ hike
- Metals stabilise – oil falls further

Coming Up

- EUR – German IFO business climate
- USD – FOMC Minutes
- NZD – RBNZ Governor Orr speaks

Equities Lower Amidst Fresh Yields Rally

Equities markets were mostly lower yesterday against a backdrop of higher global yields, fuelled by better business survey data. Today’s FOMC minutes hold the potential to drive the sell-off deeper if they are seen supporting the idea of a larger hike in March. The FTSE and the DAX both recoiled further from YTD highs yesterday with the Nikkei now also down around 3% from highs. Despite the broader sell off, Chinese stocks held up rather well with the Shanghai Composite holding at highs, currently around the 3291.1477 level.

Walmart Jumps on Q4 Beat

In the US earnings season landscape, Walmart was the big focus yesterday. The company saw its stock jump 3% on the session after pre-market earnings showed an EPS of 1.71 vs 1.52 expected on revenues of $164.04 billion vs $15975 billion expected. Looking ahead, the company issued a warning over the US economic outlook amidst high inflation and high interest rates and noted that it would be taking a cautious approach this year. Today, focus shifts to Etsy, Fiverr and NVIDA which all report Q4 earnings.

AUD Sinks As NZD Rallies on Fresh RBNZ Hike

The fall back in risk appetite on Wednesday has seen JPY the strongest currency across the European open, bolstered by safe-haven demand. AUD has been the clear loser today, losing ground across the board on the back of the latest hike from the RBNZ which has driven demand into NZD. The RBNZ hiked rates by 50bps overnight, above the 25bps the market was looking for. Looking ahead, the bank signalled that it will further slow the pace of tightening to a quarter-point hike in April and, while maintaining its 5.5% peak rate target, noted that it now expects to take longer to get there (slower tightening).

Metals Stabilise, Oil Falls Further

In the metals and commodities space, both gold and silver are holding up today. On the back of the heavy selling we’ve seen in prior week, metals appear to be treading water for now as traders await a clear signal from the FOMC minutes today. Any resultant USD strength will no doubt see selling resume. Crude oil remains under heavy selling pressure today. Futures are now down more than 6% from recent highs as hawkish Fed expectations and concerns over the demand outlook continue to lean on sentiment.