Global markets turned cautious on Wednesday as investors await the US Federal Reserve's interest rate decision, while geopolitical developments in the Middle East added to uncertainty. The Fed is expected to keep its policy rate unchanged, according to market expectations.
A US official stated that four ballistic missiles launched by Iran at a US base in Jordan were intercepted. Meanwhile, US Central Command (CENTCOM) announced that US and Saudi Arabian forces conducted airstrikes on targets linked to Iran-backed groups in eastern Iraq. Iran's Islamic Revolutionary Guard Corps (IRGC) reported targeting three oil tankers attempting to pass through the Strait of Hormuz that allegedly ignored warnings. Analysts said the resumption of conflict shows parties are far from a solution.
There were also reports that the US banned new Chinese-made humanoid robots to protect AI development, adding to trade tensions.
Federal Reserve Decision in Focus
The US Federal Reserve (Fed) is expected to keep its policy rate unchanged at its decision today. Low June consumer and producer inflation data give the Fed time to assess energy sector disruptions and inflation over the summer. Fed Chair Kevin Warsh's press conference will be watched for forward guidance and information on Fed task forces and monetary policy stance. Money markets price in rates to be kept unchanged in July, but a rate hike possibility remains on the table.
If the policy rate is kept unchanged, hawkish comments about a possible rate hike in September or other months would be interpreted as maintaining a hawkish stance. If a tight monetary policy message is given for September, it is expected to support the dollar and bond yields. If no tight monetary policy message is given, risky assets could benefit positively.
The US 10-year Treasury yield traded flat at 4.61%. The US Dollar Index fell 0.2% to 101.3.
Equity Market Movements
US chipmaker Micron Technology shares fell 8.9%, Advanced Micro Devices (AMD) shares fell 8.2%, and Applied Materials shares fell 7.8%. US beverage company Coca-Cola shares rose 5% after revising its annual revenue and profit forecasts upward. US aircraft maker Boeing shares rose 4.8% despite a larger-than-expected second-quarter loss, due to better-than-expected free cash flow. US paint manufacturer Sherwin-Williams shares rose 8.3% after second-quarter financial results exceeded expectations.
The Dow Jones Industrial Average rose 1.03%, the S&P 500 rose 0.21%, and the Nasdaq Composite fell 0.22%. Index futures showed mixed signals: S&P 500 and Nasdaq futures inched up before the Fed's decision, while other reports indicated a negative start.
In Europe, Unilever shares rose 8%, Safran rose 2.9%, ASML fell 2.9%, and Mercedes-Benz rose 2.9%. The UK's FTSE 100 rose 0.83%, Germany's DAX 40 rose 0.41%, France's CAC 40 rose 0.63%, and Italy's FTSE MIB 30 fell 0.69%. European index futures started the day negatively.
In Asia, South Korean chipmaker SK Hynix shares fell 17.7% despite second-quarter revenue up 257% year-on-year to 79.3 trillion won and operating profit up 557% to 60.5 trillion won. Japanese technology companies SoftBank Group fell 8%, Tokyo Electron fell 11.2%, and Kioxia fell 10.3%. Japan's Nikkei 225 fell 2.9%, South Korea's Kospi fell 11.3%, China's Shanghai Composite fell 0.5%, and Hong Kong's Hang Seng rose 1.4%.
Turkey's BIST 100 index fell 0.63% to 13,687.86 points, while the BIST 30 August futures contract rose 0.4% in the evening session compared to the normal session close. USD/TRY closed at 47.3790, up 0.1%, and opened today at 47.3940. Analysts noted that today's domestic data calendar is calm and the Fed's interest rate decision will be followed; technically, support levels for Turkey's BIST 100 are at 13,600 and 13,500 points, resistance at 13,800 and 13,900 points.
Today's data includes US weekly mortgage applications at 14:00 and Fed Chair Kevin Warsh press conference at 21:30. Chip stocks wobbled amid the uncertainties.