Fed Sees 3 Rate Cuts in 2024, Dow and Gold Hit Records

Equities

In London, the FTSE 100 remained unchanged, a cautious stance before today’s Bank of England policy announcement. UK inflation data slipped to 3.4% in February, a factor contributing to the increased expectations of interest rate cuts by the Bank of England this year.

Johnson Matthey stood out by climbing 7.8%, reaching a 10-month high. This surge followed the announcement of its medical device components business being sold to Montagu Private Equity for $700 million. Meanwhile, Burberry's shares declined by 3.3%, influenced by Kering's warning about a potential sales drop, which in turn affected the luxury goods sector.

All three main US stock indexes finished higher and hit fresh record highs on Wednesday with the optimism stemming from the Federal Reserve's decision to hold borrowing costs steady while hinting at the possibility of up to three rate cuts within the year. The Dow Jones Industrial Average increased by 1.03%, the S&P 500 by 0.89%, and the Nasdaq Composite by 1.25%.

Chipotle Mexican Grill saw a significant boost, with shares up by 3.5% after revealing a 50-for-1 stock split. BioNTech's shares dropped 4.4% due to a pivot towards cancer drug development, resulting in a decrease in its revenue and earnings for 2023.

Forex & Commodities

Following the Federal Reserve's decision to hold interest rates steady, the US dollar fell, while the yen strengthened after rebounding from near multi-decade lows. The Fed's stance, which also projected three rate cuts this year despite persistent inflation, influenced the dollar's performance. The yen reversed its earlier decline against the dollar, showing resilience after the Bank of Japan's decision to raise interest rates for the first time in 17 years.

Gold prices reached a new milestone, climbing to a record high as the dollar and bond yields dipped following the Fed's announcement. This environment, typically favourable for gold investments, saw spot gold rise by 1% to $2,208.30 per ounce, peaking at $2,222.39. The dynamics of lower interest rates bolster the appeal of gold by reducing the opportunity cost of holding the non-yielding asset.

Brent crude oil and West Texas Intermediate futures fell, in part influenced by the EIA's report of unexpected falls in crude oil stockpiles.