The Overnight Report: Sigh Of Relief

This story features WISETECH GLOBAL LIMITED, and other companies. For more info SHARE ANALYSIS: WTC

US markets reacted positively to the FOMC’s unchanged rate decision and update with easing financial conditions over the day. ASX200 futures are pointing to a positive opening on Thursday of circa 0.7%

Good Morning,

The Fed remains ready to respond to all data

US indices closed near session highs after the FOMC kept rates on hold, as expected, with the federal funds target range unchanged at 4.25-4.50% in a unanimous vote.

The Fed’s balance sheet run-off, known as quantitative tightening (QT), will be tapered to US$5bn per month from US$25bn per month starting in April. This easing coincides with the April 2 reciprocal tariffs kicking in.

Fed Governor Waller dissented not on the rate decision itself, but on the pace of balance sheet reduction.

His preference to maintain the current level of securities run-off was overruled as the committee opted to slow the monthly run-off of Treasury securities while keeping the mortgage-backed securities run-off unchanged at US$35bn.

Financial conditions eased slightly post-update and Powell’s press conference, with US Treasury yields moving lower and the USD weakening.

The committee also signaled rising economic uncertainty while maintaining the Fed remains attentive to both inflation and employment data.

The Fed’s 2025 GDP growth forecast was lowered to 1.7% from 2.1%, while its PCE inflation projection was raised to 2.7% from 2.5% (core PCE ticked up from 2.5% to 2.8%).

The median estimate for the fed funds rate held steady at 3.9%, implying expectations for two rate cuts this year.

Fed Chairman Powell reiterated at his press conference that there is no rush to adjust policy. He warned that it is “going to be very difficult to have a precise assessment of how much inflation is coming from tariffs” and acknowledged that surveys suggest tariffs are impacting inflation expectations.

The T’ word –“transitory”– was reinstated, with Powell highlighting the “kind of the base case” that inflationary pressures from tariffs would be transitory, adding the last time tariffs were imposed, the increase in prices was temporary.

The 10-year yield settled three basis points lower at 4.26%, and the 2-year yield settled six basis points lower at 3.98%.

The Nasdaq rallied 1.4%, with the S&P 500 up 1.08%, and the Dow leading higher (up 0.92%) with Boeing shares rallying almost 7%.

European markets were mixed, with the DAX taking a breather, along with the Nikkei and Chinese markets.

Euro area inflation continued to decline in February, with headline inflation revised slightly lower to 2.3% year-on-year, while core inflation remained at 2.6%. ECB Vice President Guindos stated disinflation is on track and expected to converge toward the 2.0% target in the coming months.

The Bank of England is expected to keep its policy rate at 4.50% on 20 March, given rising wage growth and services inflation. The MPC is likely to signal a cautious approach, with gradual rate cuts of -25bp in Q2 and Q3, followed by -50bp reductions in Q4.

Talks between Trump and Zelensky took place, with the Ukrainian President agreeing to halt strikes on Russian energy assets. US teams will meet in Saudi Arabia in the coming days to continue discussions on moving the peace process forward.

ASX futures are pointing higher by 0.7%, and gold managed to lift slightly to US$3036.26/oz.

New Zealand’s fourth-quarter GDP data will be released this morning, with Australia’s February labour force data due at 11:30 am.

Chris Weston from Pepperstone reacts to Powell and FOMC:

With US rates and bonds finding a firmer tone, relief is evident in the riskier end of the capital markets. Additional upside momentum is seen in gold, with the yellow metal hitting a high of US$3051 and consolidating in line with USD flows. US small caps have outperformed, with the Russell 2000 closing +1.6%. US high short-interest equity plays have gained traction, with the upside in the S&P500 and Nasdaq100 underpinned by a 1.7% move higher in the Mag Seven basket.

Crypto was already finding buyers ahead of the Fed meeting.

Nasdaq100 futures closed up 1.3% and appear to be carving out a range of 20,000 to 19,200. A break on either side of this range could set the tone for near-term directional trading bias. 73% of S&P 500 companies closed higher on the day, with all sectors in the green, led by consumer discretionary (Tesla and Amazon), energy, and tech.

One question is whether US tech can regain momentum and convince funds to redeploy global capital back into high-growth and momentum plays.

It’s too early to call that trade, especially with the fallout from the April 2 reciprocal tariff announcement still uncertain. However, price action remains the best fundamental indicator here, and maintaining an open mind to these flows will always serve market players well.

Corporate news in Australia

-Superannuation funds are lobbying for an overhaul of Wisetech Global’s ((WTC)) board following governance failures and perceived conflicts of interest.

-Major shareholder Bruce Mathieson supports the $250m Bally bid for Star Entertainment ((SGR)).

-Sumitomo Mitsui Banking Corporation has sold a portion of its Healthscope debt for 40c on the dollar to Deutsche Bank, which historically worked for HMC Capital’s ((HMC)) David Di Pilla.

-Genesis Energy ((GEL)) director Paul Zealand is stepping down from the board due to health reasons.

On the calendar today:

-NZ 4Q GDP

-AU Feb Unemployment

-JP Holiday

-UK BoE rate decision

-UK Jan Unemployment

-A2 MILK COMPANY LIMITED ((A2M)) ex-div 6.50c (100%)

-BRICKWORKS LIMITED ((BKW)) earnings report

-BANNERMAN ENERGY LIMITED ((BMN)) earnings report

-COCHLEAR LIMITED ((COH)) ex-div 215c (80%)

-CIVMEC LIMITED ((CVL)) ex-div 2.50c (100%)

-EARLYPAY LIMITED ((EPY)) ex-div 0.14c

-KELSIAN GROUP LIMITED ((KLS)) ex-div 8c (100%)

-K & S CORPORATION LIMITED ((KSC)) ex-div 8c (100%)

-SIGMA HEALTHCARE LIMITED ((SIG)) earnings report

-SUPPLY NETWORK LIMITED ((SNL)) ex-div 32c (100%)

-WASHINGTON H. SOUL PATTINSON AND CO. LIMITED ((SOL)) earnings report

-SPARK NEW ZEALAND LIMITED ((SPK)) ex-div 10.81c

-SERVICE STREAM LIMITED ((SSM)) ex-div 2.50c (100%)

-TOURISM HOLDINGS LIMITED ((THL)) ex-div 2.26c (100%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms