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Fed policy decision takes centre stage

Market expectations for the Federal Reserve (Fed) to cut interest rates have shifted markedly since last week’s Iran‑related oil price surge, as a higher inflation path driven by elevated energy costs will make early easing more difficult. Meanwhile, US President Donald Trump continues to urge immediate rate cuts, but economists widely expect the Fed to leave rates unchanged at today’s meeting. Wall Street and Asian stock indices edged higher before the Fed decision, and European stocks extend their recovery.

  • Date
  • Author Alessandro Fezzi, Content & Publications
  • Reading time 5 minutes

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US equities advanced modestly on Tuesday, with the Dow Jones Industrial Average closing 0.1% higher at 46,993.26 points and the broad S&P 500 up 0.25% at 6716.09, while the Nasdaq 100 gained 0.5% to 24,780.42, as investors stayed cautious ahead of the Federal Reserve’s interest rate decision and amid the Iran war and elevated oil prices. Market participants remain concerned that intensified Iranian attacks on energy infrastructure in the Persian Gulf could sustain higher oil prices, dampen growth prospects and add to inflation risks, prompting expectations that major central banks, including the Fed, may act more hawkishly than markets would like. 

US pending home sales rise on lower rates

Contracts to buy existing US homes increased 1.8% in February, defying expectations for a decline, as mortgage rates eased ahead of the Iran war. The improvement was driven by gains in the West, South and Midwest, partly offset by a drop in the Northeast, while pending sales were still 0.8% lower than a year earlier and the popular 30‑year mortgage rate, which had fallen to about 6% before the conflict, has since moved higher as rising oil prices pushed up US Treasury yields. The housing market remains a political flashpoint ahead of the November midterm elections, as President Trump promotes measures to expand mortgage credit and cut regulation, even as his tariffs and immigration policies contribute to higher costs for homebuilders.

Asian equities advance ahead of Fed decision

Asian stock markets rose on Wednesday, led by South Korea’s Kospi, which jumped more than 4% and briefly triggered a trading halt after Kospi 200 futures surged 5%. Gains were driven by heavyweight technology names, with Samsung Electronics and SK Hynix climbing over 7% and 8%, even as Samsung faces potential strike action by unionised staff in South Korea. Japan’s Nikkei 225 advanced 2.7% and the broader Topix gained 2.3% after data showed Japanese exports increased 4.2% year-on-year in February, outpacing a rise of 16.8% in the previous month but clearly beating economists’ expectations. Broader sentiment remained cautious as investors waited for the Fed’s interest rate decision later on Wednesday, while escalating conflict in the Middle East added to concerns about prolonged supply disruptions.

Euro-area stocks extend recovery

European equities advanced on Tuesday, with the euro area benchmark EuroStoxx index closing 0.5% higher at 5769.25 points, while Switzerland’s SMI gained 0.6% to 12,962.41 points, as the region’s stock markets continued their recent rebound despite persistent tensions from the Iran war and elevated oil prices. The fragile backdrop was reflected in economic data, with Germany’s ZEW economic sentiment index falling by almost 59 points from the previous month to minus 0.5 in March, which underscored heightened uncertainty stemming from the conflict in the Middle East. Energy utilities and oil producers such as Eni and Enel were among the strongest gainers in the EuroStoxx with increases of up to 3.6%, insurers including Munich Re, Swiss Re and Scor also advanced on expectations of firmer reinsurance pricing, while economically sensitive luxury and media stocks lagged.

Italian inflation revised slightly lower

Final data from Italian statistics agency ISTAT on Tuesday showed that euro-area harmonised consumer prices in Italy rose 1.5% year-on-year in February, slightly below the earlier estimate of 1.6%, while the monthly increase was revised down to 0.5% from 0.6%. Italy’s national NIC consumer price index followed the same pattern, with annual inflation in February adjusted to 1.5% from 1.6% and the month-on-month rise trimmed to 0.7% from 0.8%. The revisions suggest that inflationary pressures in Italy were somewhat weaker in February than initially reported.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Swiss SECO economic forecast (09:00), euro-area Consumer Price Index (11:00), US Producer Price Index (13:30), Bank of Canada interest rate decision (14:45), Federal Reserve interest rate decision and forecasts (19:00) and press conference (19:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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