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Weekly Sprout

High stakes as Fed hikes

25 Mar 2023

Fed rate hike, Deutsche Bank woes, and TikTok grilling

While everyone was watching TikTok CEO’s testimony in the US Congress, investors had their eyes glued on the latest Fed interest rate decision.

The Fed raised its benchmark rate by 0.25% as expected, which led to renewed concerns about how elevated interest rates could lead to stress in the financial sector.

It did not help that the cost of protecting against default by Deutsche Bank continued to spike.

What should we do amidst all the volatility?

We share how the latest Fed rate hike could affect your portfolio, and evaluate whether gold ETFs could be a potential safe haven amidst the current market uncertain. 

P.S. It's almost the end of the month, which means that the OCBC promo to get you started on a regular savings plan, and Webull’s welcome promo for new stock trading account would be ending in a few days!

Weekly price index 25 March 2023
Source: Bloomberg. Price as of 17 March

⚡️ Fed Strikes Again

What happened? 

The US Federal Reserve (Fed) announced another rate hike of 0.25% (25 basis points). 

This would bring the target range of Fed fund rate to 4.75% to 5%, the highest level since September 2007.

What does this mean?

Fed officials expect interest rates to be at 5.1% by the end of the year, the same as their projections back in December 2022. 

This would mean that the Fed is expecting another rate hike of 0.25% this year.

Fed Chairman Jerome Powell also made it clear that officials are still not projecting any rate cuts for this year. 

Why should I care? 

US stocks fell as Powell’s comments that there will unlikely be rate cuts led to renewed concerns about how elevated interest rates could lead to stress in the banking sector. 

The flight to safety also led to a fall in bond yields.

Read our analysis here. 

 


🚗 WHAT'S MOVING

  • UBS agreed to buy Credit Suisse for 3 billion Swiss Francs in a government backed deal aimed at containing a crisis of confidence that had started to spread across global financial markets.
  • Deutsche Bank (DB) saw a spike in its credit default swaps (CDS), which are a form of insurance for the company’s bondholders against its default, reigniting concerns about the European banking sector.
  • Block shares plunged after short seller Hindenburg said that company’s flagship Cash App facilitates crimes and lacks strong compliance controls. Block subsequently issued a statement that it intends to work with the SEC and explore legal action against Hindenburg “for the factually inaccurate and misleading report”.
  • Tencent’s revenue rose 1% after the consecutive quarters of decline, driving hopes that a Chinese economy recovery and more favourable regulatory environment will help to revive its growth this year.
  • Sembcorp Marine announced that its subsidiary Estaleiro Jurong Aracruz (EJA) is under investigation by the Office of the Comptroller General of Brazil (CGU) for “alleged irregularities”. Read our analysis here. 

Source: Bloomberg, CNBC, Financial Times, Business Times, Edge Singapore

 


💡 THE BIG IMPORTANT STORY

How to transfer funds from CPFIS to CPF OA at T-bill maturity

Our step-by-step guide on how to transfer funds used in CPF Investment Scheme (CPFIS) back to your CPF Ordinary Account (OA) to make sure you do not lose additional CPF interest.

Transfer CPF IA to CPF OA Tbill maturity.jpg

 


🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

Source: Bloomberg, SGX 

 


🍭 THAT’S INTERESTING

TikTok CEO Chew Shou Zi Congress.jpg

Many social media users have expressed their adoration for Mr Chew Shou Zi, the Singaporean Chief Executive Officer (CEO) of TikTok. Some said Mr Chew was treated with disrespect during a grilling by US Congress, while others also criticised him for being evasive on some questions. Mr Chew previously interned at Facebook when the social media platform was still a startup, and joined ByteDance, the parent of TikTok, as its first Chief Financial Officer (CFO) in March 2021.

Source: Straits Times, TodayOnline

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