Fed and banks in the sights of investors. What happens today?

Fed disappointment over the rate cut, new alarm over a banking earthquake and glimmers of optimism over growth in China are driving the markets today, with rather mixed sentiment.
Asian stocks ended the session with volatility.
Chinese indexes gained ground after authorities flagged potential spending plans, while shares elsewhere in Asia fell following disappointing U.S.
earnings reports and a Fed wary of an impending rate cut.
Hong Kong's Hang Seng Index advanced after a two-day decline and China's Shenzhen closed above parity.
Caixin's manufacturing PMI settled, as expected, in expansion territory and sent a message of optimism for the dragon's recovery.
Investors' attention, however, is entirely focused on Powell's post-conference and on new bets on the reduction in the cost of money promised in 2024.
Furthermore, today's trade was dominated by hints of a banking and financial earthquake coming from the USA and potentially contagious.
read also Why Chinese investors are betting on Japan Bank alarm and Fed caution dominate the markets today The Fed, especially through Powell's words, has given new indications on the expected rate cut.
The message, however, was disappointing.
Speaking after the central bank's decision, Chairman Jerome Powell said he did not think it was likely he would ease monetary policy in March.
Demonstrating that officials are in no rush to lower rates, the central bank also said that it “does not expect it will be appropriate to reduce rates until it has gained greater confidence that inflation is moving sustainably towards 2%".
Markets are now betting on a cut in May which implies a 100% chance of 25 basis points and some chance of 50 basis points easing.
“We have pushed back our forecast of the first cut from March to May,” Goldman Sachs analysts said.
“However, we continue to expect 5 cuts in 2024 and another 3 in 2025 because we expect core inflation to fall at least a couple of tenths below the FOMC median projection this year.” read also Which currencies to watch carefully in 2024 Treasury bonds rallied sharply as 10-year yields fell 12 basis points to 3.91% following the Fed's decision.
The rush for bonds was further encouraged by renewed jitters among U.S.
regional banks when New York Community Bancorp slumped 37%, its lowest in more than two decades.
The lender cut its dividend and reported a surprise loss for the fourth quarter.
The bank, which last year bought the assets of failed lender Signature Bank, said it was accumulating capital to deal with potential stepped-up regulation.
The pessimism also extended to other banking stocks.
Valley National Bancorp fell 10%, while the KBW Regional Banking Index was on track for its biggest daily decline since last May.
Not only that, Aozora Bank Ltd.
fell 21% in Tokyo after announcing losses related to U.S.
commercial properties, echoing New York Community Bancorp's woes in America.
For this reason, there is a fear of contagion and new financial turbulence.

Author: Hermes A.I.

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