HG MARKETS:

US stock futures edged lower on Wednesday, with key indexes dipping modestly. Both the S&P 500 and Dow Jones futures contracts shed around 0.1%, while the Nasdaq 100 futures were down slightly more, at nearly 0.2%. Market participants remained focused on economic data and its implications for the Federal Reserve’s future policy decisions. Two key reports, the ADP employment survey and the ISM Services PMI, are scheduled for release today at 1715 HRS PKT and 1900 HRS PKT respectively, and investors will be dissecting them for clues on economic health.

On the corporate side, Intel shares tumbled more than 4% pre-market after the company revealed its chip-making division suffered significant operating losses in 2023, amounting to $7 billion. Tesla also extended its decline, trading down about 1% before the opening bell, following a 4.9% drop on Tuesday due to underwhelming Q1 sales figures. Other chipmakers, Nvidia and AMD, also witnessed pre-market dips of around 0.9% each.Disappointing hopes for near-term interest rate cuts sent shivers down the spines of global investors, leading to a retreat in stock prices. This follows a period of solid economic data and rising commodity prices, which strengthened the notion that interest rates might stay elevated for a longer duration.

This shift in sentiment halted the momentum of global equities, preventing them from building on the strong gains seen in the previous quarter. The bond market also reflected the change in expectations. The yield on the US 10-year Treasury bond climbed three basis points to around 4.38%, a significant increase of nearly 20 basis points compared to last week’s close. This rise suggests that investors are now less optimistic about the timing and extent of potential US rate cuts in 2024. Further fueling inflation anxieties, a powerful earthquake struck Taiwan, the worst in 25 years.

All eyes will be on Federal Reserve Chair Jerome Powell on Wednesday, following his recent statement that the central bank needs further confirmation of curbed inflation before policy changes. This heightened focus comes after a positive US jobs report last Friday, coupled with strong data on US manufacturing, both of which could dampen hopes for interest rate cuts. “We anticipate a cautious market environment to prevail until the release of the US non-farm payroll data this Friday,” said Jun Rong Yeap, strategist at IG Asia Pte. “The ‘good news is bad news’ narrative continues to dominate, as strong economic data is seen as prompting the Fed to maintain current policy instead of easing.”  Financial markets are currently pricing in less than three Fed rate cuts this year, with a high possibility of any easing being pushed beyond June. This outlook contradicts comments made earlier this week by San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester, who both expressed support for three rate cuts in 2024.