Market Summary
Asian Equities Extend Selloff as AI Optimism Fades: Asian markets came under heavy pressure again overnight as investors continued rotating out of semiconductor stocks amid growing doubts over whether massive AI-related capital expenditure will generate sufficient returns. South Korea's benchmark index fell another 5.82% overnight, adding to Tuesday's steep losses and putting the market on track for its largest two-day decline on record. SK Hynix plunged as much as 18% after reporting a 557% surge in quarterly profit that still failed to meet elevated market expectations. The broader MSCI Asia Pacific Index dropped 1.5% to its lowest level since mid-April, while Nasdaq 100 futures are down 0.37% this morning, with the index on course for its fifth consecutive daily decline.
Oil Rebounds as Middle East Tensions Escalate: Brent crude climbed 4.27% this morning to $87.68 per barrel, recovering from its biggest three-day decline since April 2020. The rebound followed renewed geopolitical tensions after the US said it intercepted an Iranian "surprise attack" on its troops before carrying out retaliatory strikes. The renewed conflict has shifted market attention back to the Strait of Hormuz, raising concerns over potential disruptions to global oil supplies and renewed inflationary pressures.
Federal Reserve Decision Takes Centre Stage: Investors are now focused on today's Federal Reserve policy announcement. Markets are pricing a 29.4% probability of a 25-basis-point rate hike, although the consensus expectation remains for the Fed to leave interest rates unchanged. Analysts at JPMorgan Chase believe the market is overestimating the likelihood of a hike, assigning greater odds to a "hawkish hold" as policymakers acknowledge that inflation remains elevated while recognizing that easing energy prices could support further disinflation. Attention will then shift to the Bank of England on Thursday and the Bank of Japan on Friday.
Gold Holds Steady Ahead of Fed: Spot gold remains little changed this morning after falling 1.26% yesterday to $4,022.8 per ounce as investors await the Fed's policy decision. Meanwhile, USD/JPY continues to remain elevated near 163.54 ahead of Friday's Bank of Japan meeting, reflecting expectations that Japanese policymakers will maintain their accommodative stance as markets assign just a 1.3% probability of a 25-basis-point rate increase.
Economic Calendar
- US Fed Interest Rate Decision
- US MBA Mortgage Applications
- Belgium GDP
- Greece Unemployment Rate
Key Market Moves Today
- S&P 500 Futures: -0.25% (7,446.5)
- U.S. 10-Year Yield: +1.02bps (4.62%)
- Brent Crude: +4.27% ($87.68)
- Bitcoin: -0.26% ($63,674)
- Spot Gold: -0.17% ($4,022.8)
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