Federal Reserve (Fed) policymakers continue to express their stance on possible interest rate cuts in anticipation of the release of key inflation-related data. Taiwan Semiconductor Manufacturing has hit new highs, while HSBC has seen its shares fall after selling its Argentina unit.
Here are the five most important issues to watch for this Tuesday, April 9.
Monetary policy speech continues to gain traction
The Fed’s policy speech continues to be a key force this week, following last Friday’s jobs report and in anticipation of the release of the latest U.S. consumer price data on Wednesday.
Recent signs that the U.S. economy is in good health, even though the Federal Reserve has extended the interest rate hike cycle, have led market participants to significantly reduce their bets on the extent of rate cuts this year.
December Fed funds futures contracts on Monday showed estimates of rate cuts of about 60 basis points this year, compared with the 150 basis points that had been priced in at the start of 2024.
This has happened even as the Fed estimates cutting rates by 75 basis points this 2024.
Fed spokespeople have raised alarms about a precipitous rate cut, with Minneapolis Fed Bank President Neel Kashkari even mentioning last week the eventuality of no cuts this year.
St. Louis Fed President James Bullard notes that he is confident of three rate cuts this year as inflation approaches the central bank’s target.
Chicago Fed President Austan Goolsbee has also stated that the U.S. central bank must assess how much time it has left to cut interest rates.
Futures market cautious ahead of CPI report
U.S. equity futures remain unchanged on Tuesday on caution ahead of the release of key data linked to consumer prices.
Wall Street’s major indexes ended Monday nearly unchanged, with traders cautious about making significant moves in anticipation of Wednesday’s key release, which could define the direction of rate cuts this year.
The economic data agenda for today is light, and the focus will be not only on the inflation numbers, but also on the Federal Reserve minutes from its March meeting, where central bank members still expected three cuts by 2024, albeit with less confidence relative to their estimates from late last year.
Also, the new quarterly earnings release season will begin in earnest this week, with major banks’ reports scheduled for Friday.
TSMC stocks hit all-time highs
Stocks of Taiwan Semiconductor Manufacturing, the world’s leading contract chipmaker, hit record highs on Tuesday.
News that the U.S. Commerce Department will award it a $6.6 billion grant to build an advanced semiconductor plant in Phoenix, Arizona, aimed at producing the world’s most advanced 2-nanometer technology, fueled the rise. The chip producer is also eligible for up to $5 billion in low-cost loans.
“These are the chips that underpin all the artificial intelligence, and the components necessary for the technologies we need to sustain our economy, but frankly, a 21st century military and national security apparatus,” Commerce Secretary Gina Raimondo said in a statement.
In Taiwan, TSMC shares rose nearly 4% to an all-time high of 817.0 Taiwanese dollars, as TSMC ADRs (American Depository Receipts) rose 1% overnight.
TSMC is a key supplier to major tech companies such as Nvidia (NVDA) and Apple (AAPL), as well as a major beneficiary of the world’s insatiable interest in artificial intelligence.
HSBC to suffer a sharp fall after selling its Argentina unit
HSBC is nearing its exit from Argentina, experiencing significant financial losses, as the lender sells its Latin American unit to streamline its business.
The U.K.-based banking giant reported Tuesday that it had reached an agreement with a private Galicia group to sell its Argentina headquarters for about $550 million, suffering a pre-tax loss of $1 billion on the sale.
Apart from the pre-tax loss, which the bank will have to declare in the first quarter of 2024 after the liquidation, HSBC will also have to recognize at least $4.9 billion in accumulated historical losses on foreign currency translation reserves.
The decision is part of a deep restructuring, with HSBC having recently completed the sale of its Canadian operations to RBC to focus more on its core markets of Asia and Europe.
Oil rallies
Oil prices are trading higher on Tuesday, regaining some of the ground lost in the previous day as a result of uncertainty over a possible cease-fire in the conflict between Israel and Hamas.
The new round of ceasefire talks between Israel and Hamas in Cairo concluded a multi-day meeting on Monday, but the prospect of an imminent ceasefire remains in the short term as the two sides have failed to reach an agreement despite repeated attempts to broker peace.
Oil held near five-month highs, supported by the notion that production cuts in the oil-rich region would likely put further pressure on global crude markets.
Still, gains are minimal on Tuesday, pending the release of key inflation data in both the U.S. and China later in the week, and industry data on U.S. crude stocks later in the day.
