19 March 2026
US stocks declined on Wednesday, as oil prices rose and Fed Chair Powell said that rate cuts hinge on seeing progress in reducing inflation, indicating no near-term easing. The S&P 500 dropped 1.4%.
US Treasuries fell amid inflation worries and reduced Fed easing expectations, as oil prices rose and February PPI inflation surprised to the upside. 10-year yields rose 7bp to 4.27%.
European stocks fell on Wednesday ahead of Fed policy decision. The Euro Stoxx 50 fell 0.6%. The German DAX lost 1.0% and the French CAC edged 0.1% lower. In the UK, the FTSE 100 ended 0.9% lower.
European government bonds fell. 10-year German bund yields rose 4bp to 2.94% and 10-year French bond yields rose 5bp to 3.60%. In the UK, 10-year gilt yields rose 5bp to 4.74%.
Asian stock markets rose on Wednesday as oil prices retreated ahead of major central bank policy decisions, including the Fed. Japan’s Nikkei 225 climbed 2.9%, and Korea’s Kospi surged 5.0%. China’s Shanghai Composite and Hong Kong’s Hang Seng advanced 0.3% and 0.6%, respectively. Elsewhere, India’s Sensex closed 0.8% higher.
Crude oil prices extended gains on Wednesday. Brent for May settlement rose 3.8% to USD107.4 a barrel.
The US Federal Reserve (Fed) kept interest rates on hold, while revising up its growth and core PCE forecasts, though the Fed still expects inflation to moderate, partly due to tariff effects fading and partly due to some softening in services inflation. For rate cuts to be delivered, the Fed needs to see progress on inflation. Although the median Fed forecast remained for one 25bp cut this year and a further 25bp cut in 2027, the distribution of dots shifted up with a hawkish tilt.
In the US, headline PPI unexpectedly rose 0.7% mom in February, from 0.5% mom in January.
The Bank of Canada left its policy rate on hold at 2.25% amid heightened trade and geopolitical uncertainty. Growth risks were tilted to the downside, whilst inflation risks are on the upside.
The European Central Bank is likely to keep rates on hold for a prolonged period, with policy around neutral and an uncertain growth and inflation outlook.
The Bank of England may keep interest rates unchanged as increased oil-driven inflation jitters suggest a majority favouring a pause in the near-term, mindful of potential second round price effects.
The Bank of Japan may keep policy unchanged in the near term, but a strong FY26 shunto pay round and weaker yen could prompt a modest rate rise in Q2.
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