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The stock market yesterday was tossing from one side to the other, digesting comments of the head of the US Federal Reserve, Jerome Powell. As a result, Mr. Powell did not give any new clues. The Fed still sees the need for further rate hikes in the fight against inflation, which is likely to be protracted. As the stock market closed Tuesday, the Dow Jones index (US30) increased by 0.78%, and the S&P 500 Index (US500) added 1.29%. The Nasdaq Technology Index (US100) jumped by 1.90% yesterday.

According to the Fed's rate monitoring tool, expectations for a rate hike in March are almost entirely factored into prices, while the probability of a rate hike in May jumped from 38% to 69%. The final rate is expected to be 5.00-5.25% in May, after which the central bank will take a long pause until the end of the year.

Microsoft Corporation (MSFT) and Alphabet Inc (GOOGL) are showing strong growth. An AI arms race has begun between the two technology heavyweights. One day after Google released its chatbot Bard, based on its LaMDA artificial intelligence, Microsoft held an event detailing plans to integrate ChatGPT into its Bing search engine as well as other products.

Equity markets in Europe traded yesterday without a single dynamic. German DAX (DE30) decreased by 0.16%, French CAC 40 (FR40) lost 0.07%, Spanish IBEX 35 (ES35) added 0.06%, and British FTSE 100 (UK100) increased by 0.36% on Tuesday.

The FTSE 100 index is nearing its first test of its recently formed all-time high on BP's optimistic results. The London-based company posted record earnings of $27.7 billion in 2022, breaking its previous record of $26.2 billion. BP also announced an additional $2.75 billion in shares buybacks and plans to pay a dividend of 6.61 cents. Similarly, Shell, the largest company in the FTSE 100 index, benefited from higher energy prices and earned a record profit of $42 billion last year.

ECB spokeswoman Isabel Schnabel said yesterday that the slowdown in inflation in Europe is not yet due to ECB policy, with core inflation (excluding food and energy prices) remaining extremely high.

Yields on two-year UST (bonds), sensitive to interest rates, are slightly below the level last seen at the end of last year. Gold is inversely correlated to US government bond yields and the dollar index. Against the backdrop of further US Federal Reserve rate hike plans, higher UST yields are expected for a longer period of time, so it will be difficult for gold to regain its recent high levels.

Natural gas futures increased for a second straight day on Tuesday, adding just over 5% thanks to forecasts of cooler temperatures in the coming weeks. But analysts believe this is a temporary bounce and a new bottom is yet to come because storage levels are 9.4% higher than a year ago, and production has reached near-record levels of about 100 billion cubic feet a day, which has significantly weakened the fundamental outlook for gas.

Asian markets also traded without a single trend yesterday. Japan's Nikkei 225 (JP225) decreased by 0.03% yesterday, China's FTSE China A50 (CHA50) fell by 0.14%, Hong Kong's Hang Seng (HK50) ended the day up by 0.36%, India's NIFTY 50 (IND50) lost 0.24%, and Australia's S&P/ASX 200 (AU200) ended the day down by 0.46%.

The Australian dollar rose sharply after the RBA raised its interest rate target to 3.35% from 3.10%. The acceleration in the Consumer Price Index caused some concern among bank officials. The RBA's accompanying statement said that the board expects that further interest rate increases will be needed in the coming months to ensure that inflation returns to target levels and that this period of high inflation is only temporary. The futures market is starting to lean toward another potential 25 bps hike in March.

• S&P 500 (F) (US500) 4,164.00 +52.92 (+1.29%)
• Dow Jones (US30) 34,156.69 +265.67 (+0.78%)
• DAX (DE40) 15,320.88 −25.03  (−0.16%)
• FTSE 100 (UK100) 7,864.71 +28.00 (+0.36%)
• USD Index 103.39 −0.23 (−0.22%)
   

Important events for today:

• US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

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