All eyes are on Chair Powell’s post FOMC press conference All eyes are on Chair Powell’s post FOMC press conference All eyes are on Chair Powell’s post FOMC press conference

All eyes are on Chair Powell’s post FOMC press conference

Equities 8 minutes to read
APAC Strategy Team

Summary:  With a 50bp hike and announcement of balance sheet reduction baked in the cake, market directions hinge on Fed Chair Powell’s remarks at the press conference.

What’s happening in markets that you need to know?

US major indices likely to remain volatile. US stocks pushed higher for the second day; The Nasdaq 100 rose 0.2% and S&P 500 rose 0.5%. So this supports clients So we could see a dead cat bounce over next few weeks. But medium – longer term, the outlook is still bearish with slower economic growth, peak inflation expectation and smaller overall company profits.

The Federal Reserve’s FOMC meeting entered its 2nd day; expected to raise the overnight Fed Fund rate by 50 basis points and remove liquidity from the financial system at a rate of up to USD95 billion a month starting from June. Market interest rates and futures are pricing for the targeted overnight Fed Fund rate band to rise to 2.75%-3.00% by the end of this year, which implies another 200 basis point hike in total in the five meetings from June to December 2022. For long term investors this means, companies with rising free cash flows, strong market positions will be favoured, (like commodities), while tech stocks and consumer discretionary will likely feel the most pinch ahead.

Apple (AAPL) has hired a 31-year Ford (F) exec to ramp up electric car work, who has experience developing EVs and working through regulatory issues. Apple shares are up slightly (up 0.13% in after hours trade.

Chip makers surprisingly beat the street: AMD (AMD) reported better than expected results and forecasts and their shares are up 7% after hours. Nvidia (NVDA) shares are also higher after hours after it guided for stronger margins ahead. It is however worth noting that this included the acquisition of Xilinx which closed in February, and some analyst estimates may not have reflected the consolidated forecasts. Still, concerns around softness in PC sales were rampant and PC demand is in a secular downtrend. - a warning we also shared last week. AMD gained share in high end computing and gains in cloud and enterprise data centers may sustain. However, it is hard to imagine growth in semiconductor firms can continue at this pace amid the supply chain challenges and diminishing demand outlook.

The Australian share market adjusts following the RBA’s first rate hike in a decade yesterday. The ASX200 swum from a profit on Wednesday to a loss (down 0.1%), extending its downtrend, despite the economy strengthening. Laggards include; stay at home economy stocks like 4WD accessory business ARB (ARB) falling 11% and buy now pay later big loser Zip (ZIP) falling 9.1% today (taking its drop from the 2021 high to 92%). Adding fuel to the tech stock fire are spiking Australian bond yields, as investors continue to sell off bonds. On the upside: bond holders like Insurance Australia Group (IAG) and investment groups Macquarie (MGQ) trade higher, with IAG shares up 2.1% in anticipation of profits potentially jumping 8-10% (Bloomberg). On the economic news front today; Australian preliminary retail sales rose more than expected in March (rising 1.6%, vs 0.5% expected). And better than expected home loan data for March came out; showing Australian home loans rose 0.9% (the market expected loans to fall 2%, following  the 5% drop in Feb). But don’t be fooled, lending is expected to continue to fall from the April 2021  high, as rates rise.

Hang Seng TECH Index fell 2.8% following JD Health’s (06618) majority shareholder cutting its stake and the U.S. SEC’s probe on Didi (DIDI).  The shares of JD Health fell 11% after Chairman and majority shareholder Richard Liu unloading 5 million shares.  The U.S. SEC’s investigation on Didi’s 2021 U.S. IPO has also dampened sentiments towards Chinese internet stocks.  Alibaba (09988), Meituan (03690), JD.COM (09618), Tencent (00700) and Bilibili (09626) fell 3% to 6%.  As we suggested in our previous note, the hype in Chinese internet stocks from last Friday is set to fade.

Asian equities brace for Fed’s jumbo hike. Equity markets in Asia traded with a cautious start on Wednesday even as S&P 500 futures rose marginally. China and Japan markets remain closed for holidays. Singapore’s STI Index (ES3) was trading near neutral as Yangzijiang Financial Holding (YF8) dropped close to 10% while Venture Corp (V03) – a global tech services firm – rose over 4% after solid results reported last Friday.

US dollar remains on the front foot going into the FOMC. The USD has eased slightly but it remains near its peak going into the FOMC meeting today. AUDUSD reversed somewhat after the kneejerk following the hawkish RBA surprise yesterday, but AUDNZD remains above the critical 1.10 at near 4-year highs. Even though the RBA has been late to the tightening game, AUD crosses are generally likely to push higher as RBNZ cannot match what's to come from the RBA now. Meanwhile, critical levels remain on test with the USDJPY stuck near the 130-level and EURUSD still near 1.0500 but unable to break below convincingly.

Asia PMIs broadly higher in April. Asia’s factory output have been modestly higher in April, despite China’s lockdowns as US demand growth offset. Better manufacturing PMI prints were reported from South Korea, Philippines, Myanmar and Indonesia. While the run rate is unlikely to be maintained as supply constraints get worse with China's zero covid and the prolonged war, it is still a big contrast to the euro area which reported April PMIs at 15-month lows.

What to consider?

The U.S. labor market remains “tight to an unhealthy level”.  The U.S. Job Openings (JOLTS) data released yesterday increased 206K to 11.55 million.  This brings the job opening to unemployment ratio to a new record high of 1.94 times, i.e. every 1.94 job openings per one unemployed person.  It is worthwhile to note that Chair Powell said at the March FOMC press conference that the U.S. labor market was “tight to an unhealthy level” when making reference to this ratio at 1.7 times.  The JOLTS data support the scenario of a hawkish Powell at the conference tonight.

Australian banks pass on the RBA interest rate hike already, after RBA hike rates larger than expected yesterday. Despite lending rates falling for months now, construction slowing, and bond yields rising 0.11% to 3.12%, all of Australia’s biggest banks passed on the rate hike almost immediately. And it’s in the thick of reporting season. Australian 8th biggest company and the 4th biggest bank, ANZ Bank (ANZ) reported results.  ANZ’s cash profit rose 4.1% y/y to $3.1billion (vs $2.89billion expected) in the half financial year, while its net interest margin only rose 1.58% y/y, missing already low expectations for 1.63% y/y growth. This highlights banks are also finding it hard to make money, at a time when lending growth has already slowed.

The AUDUSD rises for the second day after bond yields rise. After the RBA rose rates more than expected yesterday the Aussie dollar rose of its January low. Remember, as a central bank rises rates, their currency traditionally gains value. But given the largest bank in the world, US Fed is poised to rise rates (Wednesday in the US), the AUD is likely to potentially lose value. If the Fed is more hawkish, the USD will likely rise, and the AUD will probably fall. If the Fed is more dovish, the AUD will likely rise for the third day.

Musk watch: As Elon Musk is working out finances to takeover Twitter (TWTR) and make it a private business, Musk announced he wants to take Twitter public down the track. Tesla (TSLA) shares rose 0.7% on Tuesday.

Gold (XAUUSD) at 11-week lows ahead of FOMC. Gold prices have dropped to their lowest levels since mid-February, amid expectations of a hawkish Fed and a higher USD. Still, the Ukraine war and rampant global inflation continues to drive demand for the precious metal. From a technical perspective, gold is testing the $1850 support and a reversal could take it back to $1920.

Wilmar (F34) headwinds on a rise. Wilmar reported robust Q1 earnings last Friday on the back of strong performance in plantation and sugar milling segments. However, a muted Q2 outlook due to the ban on Indonesia’s palm oil exports, as well as China’s demand slowdown amid lockdowns will start to weigh. High commodity prices are also expected to impact margins in Food Products segment, and this could mean more downgrades to come after Morgan Stanley’s move to Hold from Buy earlier.

Trading ideas to consider

How to trade the Fed? With a series of 50bp and 25bp Fed rate hikes priced in by the markets, focus will be on Fed Chair Powell’s remarks at the post meeting press conference.  If he hints at being open to multiple 50 bp hikes (instead of 25 bps) beyond May or even 75bp increases in some meetings, we could see a further run higher in US treasury yields and the US dollar and selling in equities.  If he dismiss this and risks getting perceived as dovish and behind the curve,  that  could mean a sharp reversal in USDJPY, EURUSD or USDCNH – each of which have been key plays in the policy divergence theme.

Key economic releases this week:

  • Wed, May 4: Singapore PMI, US April ADP, US March trade, US FOMC
  • Thu, May 5: NZ employment, Australia building approvals, Australia March trade, China Caixin services PMI, Singapore retail sales
  • Fri, May 6: Japan Tokyo CPI, US non-farm payrolls

For an update on Saxo’s global look at markets – tune into the Special Edition with Steen Jakobsen podcast.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.