• The Fed hiked rates by 25bps to 5.25%-5.50%, as expected, with the statement a copy & paste job from June.
• Markets initially perceived the presser as dovish after Powell avoided committing to future rate hikes and stressed a data-dependent approach.
• US equity futures edged higher overnight with NQ boosted by Meta shares post-earnings, APAC stocks were also firmer.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed down by 1.0% yesterday.
• DXY slipped below 101, EUR/USD eyes 1.11 ahead of ECB, USD/JPY oscillates around 140 and antipodeans lead the majors.
• Looking ahead, highlights include German Gfk, US Durable Goods, PCE Prices Advance, IJC, GDP Advance, ECB Policy Announcement and Press Conference with Lagarde, Supply from Italy & US.
• Earnings from L'Air Liquide, BNP Paribas, Mercedes-Benz, ArcelorMittal, L'Oreal, Poste Italiane, Renault, Schneider Electric, STMicroelectronics, TotalEnergies, Volkswagen, Anglo American, Barclays, BT, Shell, McDonald's, Ford, Abbvie, Mastercard & Intel Corp.

US TRADE

EQUITIES

• US stocks finished mixed after whipsawing as markets focused on the FOMC and Powell's press conference in which the Fed hiked rates by 25bps to 5.25%-5.50%, as expected, with the statement a copy & paste job from June, albeit with the acknowledgement that activity grew at a moderate pace (prev. modest). The statement and rate decision sparked little reaction but the press conference saw two-way movements as markets initially perceived the presser as dovish after Powell avoided committing to future rate hikes and stressed a data-dependent approach, although noted that they are prepared to hike if the data deems it necessary. US indices were initially boosted but eventually unwound the gains as Powell repeated the June SEPs that the FOMC does not see inflation returning to the 2% target by 2025 (with those forecasts incorporating one more rate hike ahead based on the dot plots in June).
• SPX -0.02% at 4,566, NDX -0.40% at 15,499, DJIA +0.23% at 35,520, RUT +0.72% at 1,980.
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FOMC

• Fed hiked the FFR by 25bps to 5.25-5.50%, while there were no major changes to July FOMC statement compared with the June FOMC in which it retained the language that in determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. However, one slight adjustment was the description of economic activity which it stated has been expanding at a "moderate" pace vs a "modest" pace in the June statement. Furthermore, it reiterated job gains have been robust and the unemployment rate remains low, while it also retained the language that inflation remains elevated and the Committee remains highly attentive to inflation risks.
• Fed Chair Powell said at the press conference that growth in consumer spending has slowed from earlier in the year but there is still a strong pace of job growth and the labour market remains very tight. Powell also stated that the FOMC is to take a data-dependent approach on future hikes and getting back to 2% inflation has a long way to go.
• Fed Chair Powell said during the Q&A that they haven't made a decision to go every other meeting and haven't made any decisions about future meetings, while June CPI was welcomed but was only one month's report. He also stated it is possible the Fed could hike again in September if data warrants it and that stronger growth over time could add to inflation and may require a policy response. Powell said they need to see inflation "durably down" and want to see core inflation coming down, which is still pretty elevated, while he noted it is a good thing that headline inflation has come down so much which will strengthen public perception of inflation coming down. Furthermore, Fed Chair Powell said a more gradual pace does not automatically go to every other meeting which they do not want to do and said staff are no longer forecasting a recession, while he added that hiking until they get to 2% is a formula for going past the target and if they see inflation coming down credibly, they can move down to a neutral level and then below neutral at some point.

NOTABLE HEADLINES

• US Senate Majority Leader Schumer said he is worried Republicans are steering towards a government shutdown over FY24 spending bills.
• CBO revised 2023 US real GDP growth forecast to 0.9% (prev. 0.1% in Feb) due to first-half labour market strength and now projects 2023 average US unemployment rate at 3.7% (prev. 4.7%).

AFTER-MARKET EARNINGS

• eBay Inc (EBAY) Q2 2023 (USD): Adj. EPS 1.03 (exp. 0.99), Revenue 2.54bln (exp. 2.51bln); Gross merchandise volume fell 1.9% Y/Y to 18.2bln (exp. 18.4bln), Active buyers fell 4.3% Y/Y to 132.0mln (exp. 132.9mln).Shares were lower by 4.3% in after-hours trade.
• Meta Platforms Inc (META) Q2 2023 (USD): EPS 2.98 (exp. 2.91), Revenue 32.00bln (exp. 31.12bln), Advertising Revenue 31.50bln (exp. 30.42bln), FB DAUs 2.06bln (exp. 2.03bln), FB MAUs 3.03bln (exp. 3.00bln). Q3 Revenue view 32.00-34.50bln (exp. 31.18bln). Shares were higher by 6.8% in after-hours trade.

See our headline feed for more details

APAC TRADE

EQUITIES

• APAC stocks traded higher in the aftermath of the FOMC meeting and press conference where the Fed delivered a widely expected 25bp rate hike and Powell kept the door open for a further increase although didn’t commit to any decision and stressed a data-dependent approach.
• ASX 200 was led by strength in real estate and tech, while participants also digested production updates.
• Nikkei 225 was initially hesitant amid a firmer currency and as the BoJ kick-started its 2-day policy meeting but eventually conformed to the rally.
• KOSPI gained with the spotlight on earnings including Samsung Electronics which topped estimates.
• Hang Seng and Shanghai Comp were positive with outperformance in Hong Kong despite the HKMA’s lockstep rate, as sentiment benefitted from recent support efforts and with the tech and auto industries lifted after China issued guidelines on the standardisation of intelligent connected vehicles and with regulators holding talks with major ride-hailing firms. Furthermore, XPeng shares surged over 30% in early trade after Volkswagen took about a 5% stake in the Co. and plans to jointly develop two electric models for the mid-size segment.
• US equity futures edged higher overnight as the risk appetite across Asia-Pac brightened.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed down by 1.0% yesterday.

FX

• DXY remained pressured post-FOMC and retreated below the 101.00 level as Asia-Pac markets took their opportunity to react to the comments from Fed Chair Powell who refused to commit to any future decision on rates and acknowledged that they could hike again in September if the data warrants it but repeated his data dependency.
• EUR/USD benefitted from the dollar selling and just about reclaimed the 1.1100 handle albeit with the upside capped heading into the ECB rate decision.
• GBP/USD continued on its gradual ascent with a further boost seen in the aftermath of the FOMC.
• USD/JPY breached through support at the 140.00 level to the downside with USD/JPY overnight implied volatility at multi-month highs ahead of tomorrow’s BoJ policy announcement.
• Antipodeans took a swipe at the dollar alongside the positive risk appetite and strengthening yuan.
• PBoC set USD/CNY mid-point at 7.1265 vs exp. 7.1468 (prev. 7.1295)

FIXED INCOME

• 10yr UST futures were choppy and yields were flat overnight after the post-FOMC bull steepening.
• Bund futures bounced back from the prior day’s lows as the attention shifts to the ECB meeting.
• 10yr JGB futures partially nursed losses but with the rebound capped by a weaker 2yr auction and ahead of the BoJ policy decision.

COMMODITIES

• Crude futures rallied overnight as the risk appetite in Asia improved and the greenback retreated.
• Nigeria raised August Bonny Crude official selling price to a premium of USD 0.38/bbl vs dated Brent and raised Qua Iboe OSP to a premium of USD 0.75/bbl vs dated Brent, according to Reuters.
• Russia expects to produce 515mln tons of oil this year, according to TASS
• Spot Gold held on to its post-FOMC advances after Powell's reluctance to commit to future hikes.
• Copper futures were firmer owing to the dollar weakness and ongoing China stimulus hopes.
• Chile's Cochilco sees average copper prices at USD 3.85/lb in 2023 (prev. forecast of USD 3.90/lb).

CRYPTO

• Bitcoin eked mild gains overnight but remained beneath the USD 29,500 level.

NOTABLE ASIA-PAC HEADLINES

• Hong Kong Monetary Authority raised its base rate by 25bps to 5.75%, as expected.
• US Pentagon is seeking supply of chip minerals after China export curbs and a contract is planned to draw Gallium from "existing waste streams", according to Bloomberg.
• BoK said it will strengthen the role of the standing lending facility as a liquidity backstop for financial institutions, while it will lower lending rates, accept more collateral and extend the maturity for loans taken out from its standing lending facility.

DATA RECAP

• Chinese Industrial Profits YY (Jun) -8.3% (Prev. -12.6%)
• Chinese Industrial Profits YTD (Jun) -16.8% (Prev. -18.8%)
• Australian Export Prices (Q2) -8.5% (Prev. 1.6%)
• Australian Import Prices (Q2) -0.8% (Prev. -4.2%)

GEOPOLITICS

• North Korea said a Chinese official delivered a letter from President Xi to North Korean Leader Kim and Kim said the dispatch of the Chinese delegation shows Xi's commitment to bilateral ties, while the official noted China is willing to contribute to regional peace and stability, as well as North Korea's prosperity and development, according to KCNA.
• North Korean leader Kim met with Russian Defence Minister Shoigu and they visited a missile and arms expo with senior government officials. Furthermore, North Korean and Russian defence chiefs held talks and their countries are to step up cooperation against gangster-like US hegemony, while the visit is to boost unity in the face of a common enemy and North Korea said it fully supports Russia's battle to protect sovereignty and safety, according to KCNA.
• French President Macron denounced "new imperialism" in the Pacific during a landmark visit to the region and warned of a threat to the sovereignty of smaller states, according to AFP News Agency.

UK/EU

NOTABLE HEADLINES

• UK's Unite said the weekend Gatwick strike was called off as it secured double-digit pay rises at two more firms.
• UK Treasury advisors are reportedly worried the BoE risks overdoing in the inflation fight, according to Bloomberg; believe that rate hikes should slow