Investing.com – Federal Reserve spokespeople continue to voice their opinions on potential interest rate cuts ahead of key inflation data. Taiwan Semiconductor Manufacturing Co. posted a new high, while HSBC is set to post a big pre-tax loss with the sale of its Argentina unit.
1. Federal talk continues strongly
Federal Reserve talk remains a major force this week, following Friday’s rally on the website and ahead of the latest data on US consumer prices on Wednesday.
Recent evidence of the health of the US economy, despite the Fed’s prolonged rate hike cycle, has led traders to significantly reduce bets on how much the Fed will cut interest rates this year.
December Fed funds futures on Monday reflected expectations of a rate cut of about 60 basis points this year, compared with about 150 basis points priced in at the start of 2024.
This happened even as the Federal Reserve expects it will cut interest rates by 75 basis points this year.
Fed spokespeople have sounded the alarm about cutting interest rates too early, with the head of the Minneapolis Fed even signaling last week that there might be no cuts this year.
However, the tone appears to have turned more dovish this week, as former St. Louis Fed President James Bullard said he expects three interest rate cuts this year as inflation moves toward the central bank’s target.
The head of the Chicago Fed also said that the US central bank should consider to what extent it can maintain its current stance on interest rates without harming the economy.
2. Stability of futures contracts; Caution ahead of the release of the headline CPI
US stock futures were largely unchanged on Tuesday, amid cautious trading ahead of key consumer price data.
By 04:35 EST (08:35 GMT), a contract was down 30 points, or 0.1%, an index was up just 1 point, or 0.1%, and an index was up 14 points, or 0.1%.
Wall Street’s main indexes closed near a flat line on Monday, with traders wary of placing big bets ahead of Wednesday’s data that could determine expectations for interest rate cuts.
The list of economic data is quiet on Tuesday, with focus not only on Wednesday’s inflation figures but also on the March meeting as officials continued to forecast three cuts for this year albeit with less conviction compared to their forecasts from the end of last year.
The new quarterly earnings season is also set to begin in earnest this week, with reports from major banks on Friday.
3. TSMC shares rise to all-time highs
The only way appears to be up for Taiwan Semiconductor Manufacturing Co. (NYSE:), as shares of the world’s largest chipmaker rose to a record high on Tuesday.
This came on the heels of news that the US Department of Commerce will award a $6.6 billion subsidy to an advanced semiconductor factory in Phoenix, Arizona, to produce the world’s most advanced 2nm technology. The chipmaker was also eligible for up to $5 billion in low-cost loans.
“These are the chips that power all of our AI, the chips that are essential components of the technologies we need to support our economy and, frankly, a military and national security device for the 21st century,” Commerce Secretary Gina Raimondo said in a statement.
Shares of Taiwan’s TSMC jumped nearly 4% to a record high of NT$817.0, while TSMC’s American depositary receipts rose 1% in overnight trading – both of which are more than 30% higher so far this year.
TSMC is a major supplier to technology giants, including Nvidia (NASDAQ:) and Apple (NASDAQ:), and has been a major beneficiary of the seemingly insatiable global interest in artificial intelligence.
4. HSBC takes a hit with its sale of Argentina unit
HSBC (LON:) is set to leave Argentina, incurring huge losses as the bank sells its Latin American unit as part of efforts to simplify its business.
The UK-based banking giant announced on Tuesday that it has entered into a binding agreement with private financial group Grupo Financiero Galicia to sell its Argentine business for $550 million, taking a $1 billion pre-tax loss on the sale.
Along with the pre-tax loss, which the bank will report in the first quarter of 2024 following the sale, HSBC will also recognize at least $4.9 billion in historical accumulated foreign currency translation reserve losses.
The move comes as part of a massive restructuring, with HSBC recently completing the sale of its Canadian operations to RBC as it tries to focus more on its key Asian and European markets.
5. Crude oil is regaining some of its lost gains
Oil prices rose on Tuesday, recovering some of what was lost in the previous session due to uncertainty over a potential ceasefire in the conflict between Hamas and Hamas.
By 04:35 ET, futures rose 0.5% to $86.87 per barrel, while one contract rose 0.5% to $90.85 per barrel.
A new round of ceasefire discussions between Israel and Hamas in Cairo ended a multi-session rally on Monday, but the prospects for an immediate ceasefire remain weak given the failure of the two sides to reach an agreement despite repeated efforts to broker peace.
Oil prices remained near five-month highs, supported by the idea that any production cuts from the oil-rich region would likely further tighten global oil markets.
However, gains remain slight on Tuesday ahead of key inflation data from both the US and China later in the week, as well as industry data on US crude inventories later in the session.
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2024-04-09 09:50:00
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