market insights

Weekly Market Insights: Powell Implies Another Interest Hikes In 2023

Federal Reserve Chairman Powell’s remarks implied further interest rate hikes in 2023, leading to a decline in major stock indices last week. Investors will continue to monitor the Fed’s next steps, as well as this week’s inflation data, two consumer confidence indices, and Nike’s earnings report.

What you need to know

Last week, Powell testified in Congress, stating that inflation is more persistent than expected and indicating that the central bank still has a long way to go in bringing inflation down. Given the limited data available before the central bank’s next policy announcement on July 26th, this Friday’s inflation data will receive closer attention.

The stock market experienced its worst week in the past few months, with all three major indices declining. Nevertheless, the stock market has performed well in June, with the Nasdaq index up over 7%, the S&P 500 index up nearly 5%, and the Dow Jones Industrial Average up approximately 2%.

The market may be looking for new drivers as AI-driven tech stocks took a backseat in the past week. Investors appeared to sell off some recent winners, with semiconductor stocks declining and Bitcoin hitting a new 52-week high.

Earnings reports from Nike, Carnival, Walgreens, and Rite Aid will be announced this week. Nike’s earnings report will be one of the key focuses of the week. As a leading national sportswear brand, Nike has already started reducing excess inventory in the past few quarters. However, analysts still worry that inventory headwinds may pressure margin growth.

What’s happening in Singapore

MAS has fined DBS, OCBC, Citi, and Swiss Life for violating money-laundering rules discovered during the Wirecard probe. DBS faced the highest penalty, totaling SGD2.6 million, for breaching regulations from July 2015 to February 2020 concerning 11 corporate customers. MAS found that DBS failed to maintain updated due diligence information on beneficial ownerships and risk ratings for money laundering and terrorism financing. OCBC was fined SGD600,000 for breaches between June 2015 and January 2016, involving one corporate customer.

In the property and REITs sector, ESR-Logos REIT plans to sell seven industrial assets for SGD337 million. The net proceeds will be utilized for higher-quality new economy assets, as well as asset enhancement initiatives and redevelopment projects. If the funds from equity fundraising and divestments are used to repay existing debt, the REIT’s pro forma gearing for FY22 will decrease from 41.8% to 33.6%, as of end-December 2022. This will also provide the REIT with a debt headroom of approximately SGD996.4 million, up from SGD305 million previously.

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