Fed signals rate cuts are coming, sending markets soaring

Fed signals it will stay the course on rate cuts: The US Federal Reserve left rates unchanged at 5.25-5.5% in line with expectations, citing solid expansion of economic activity, elevated but easing inflation, strong job gains, and low unemployment, the central bank said in a press release.

Bullish on growth: The Fed raised its forecast for US economic growth this year, saying that it expects GDP to expand by 2.1% this year, compared to previous forecasts of 1.4%. “The economy is performing well,” Fed chair Jerome Powell said during a presser (watch, runtime: 1:11:22) after the Fed wrapped up its two-day meeting. That said, he added that there will be challenges before the economy moves into a soft landing, with core inflation projections currently sat at 2.6% in 2024, above the Fed’s 2% target.

Sit tight for rate cuts this year: Policymakers signaled that the central bank is still on track for rate cuts this year, with a three-quarters of a percentage point cut expected before the end of 2024. More officials are now expecting three cuts in 2024.

Market reax: The Fed’s meeting sent investors to market, leading to a spike in the S&P 500, which closed at a record 5,225 on Wednesday. Tech-heavy Nasdaq 100 rose 1.2% while gold rose 1.6% to as much as USD 2,200 per ounce for the first time. Two-year Treasury yields fell 0.09 percentage points to 4.60%.

THE MARKET THIS MORNING-

Traders this morning welcomed the US Federal Reserve’s guidance: All of our the major Asian benchmarks we follow are up in early trading — and three of them are soaring, up nearly 2%: The Nikkei, Kospi, and Hang Seng.

Sound smart: The Nikkei has just hit an all-time high. Traders were already in a good mood, having welcomed the Bank of Japan’s move earlier this week to raise interest rates for the first time since 2007. Prior to the move, Japan was the world’s last remaining negative-rates regime.

Futures are also up, with everything from S&P, Nasdaq, and Dow futures to wagers on European equities and oils on the rise.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.1% yesterday on turnover of SAR 8.2 bn. The index is up 7% YTD.

In the green: Saudi Cable (+10%), Middle East Specialized Cables (+9.9%) and Sumou (+9%).

In the red: Saudi Steel Pipe (-7.8%), Enaya (-5.4%) and SICO Saudi REIT (-4.9%).

THE CLOSING BELL: NOMU-

The NomuCrose 0.3% yesterday on turnover of SAR 49.7 mn. The index is up 11% YTD.

In the green: Jahez (+9.7%), Amwaj (+4.9%) and Balady (+4%).

In the red:Group Five (-14.9%), Future Care (-11.3%) and Osool and Bakheet (-7.3%)

CORPORATE ACTIONS-

#1- Saudi Cable will submit its financial restructuring procedure proposal to Riyadh’s commercial court within a “week or less,” the company’s Chief Financial Officer Abdulaziz Batarfi told Al Arabiya in an interview yesterday (watch, runtime: 9:38). The move comes as part of its strategy to restructure capital and liabilities. He estimated the company’s debt pile as SAR 1 bn with the list of creditors including Al Rajhi Bank and Asia’s Noble Resources International.

ICYMI- Shares of Saudi Cables resumed trading on the main market yesterday after Tadawul lifted a near two-year suspension imposed due to a delay in disclosing financial statements. Its shares were up 10% at SAR 62.9 by the closing bell.

#2- Saudi Enaya Cooperative Ins. will hike its capital by SAR 150by way of a rights issue, it said in a filing to Tadawul. The hike would bring the company’s total capital to SAR 380 mn.

#3- Gulf General Cooperative Ins. BoD has reversed Tuesday’s recommendation for a capital hike in favor of a 40% capital reduction, it said in a disclosure to Tadawul. This would be by way of share cancellation at a discount of 0.4 shares for each share in a bid to restructure and write off SAR 200 mn in accumulated losses, bringing down the company’s total capital to SAR 300 mn, down from SAR 500 mn.

#4- Nomu-listed Saudi Advanced Industries (SAIC) BoD has scrapped an earlier proposal to distribute some of its shares in subsidiary Obeikan Glass due to “difficulty” in distributing shares to shareholders not eligible to trade on the parallel market, it said in a disclosure to Tadawul yesterday. Instead, SAIC raised its dividend payout to SAR 59 mn at SAR 1 apiece for FY 2023.