Thursday March 21st

21-03-2019

Dow set to drop more than 100 points on economic worries, Biogen shares plummet

U.S. stock index futures fell on Thursday morning as investors digested the Federal Reserve's latest announcement on monetary policy as well as a sharp drop in Biogen shares. At 7:48 a.m. ET, Dow Jones Industrial Average futures indicated a decline of 136 points at the open. Futures on the S&P 500 and Nasdaq 100 also fell. The Dow closed lower on Wednesday after the Federal Reserve announced a more dovish policy. Jerome Powell, the Fed's chair, said the central bank is forecasting no rate hikes in 2019, which is down from two hikes forecast earlier. U.S. Treasury yields fell on the news, which added pressure on certain stocks, including banks. Rising rates are good for banks since they are able to lend out money to investors at a profitable rate of interest. Lower interest rates restrict the bank's ability to make profits thus adding pressure on margins. The central bank also lowered its growth outlook for 2019 and indicated it would end its balance-sheet reduction process by the end of September. "While the Fed continues with the wait-and-see policy stance, we think it would require a material deterioration in growth or some exogenous shock to the markets for the Fed to be completely done raising rates in the current cycle," said Charlie Ripley, senior investment strategist at Allianz Investment Management. "The prospects for the U.S. economy remain positive relative to the rest of the global economy." U.S.-China trade is also in focus for investors after mixed comments from the White House. President Donald Trump said Wednesday that Washington's tariffs on Beijing could stay on for a "substantial period of time." Shares of biotech company Biogen plunged 26 percent in the premarket after discontinuing trials for a drug aimed at treating Alzheimer's Disease. Shares in Asia mostly rose on Thursday after the U.S. Federal Reserve announced it was keeping interest rates on hold, and indicated that no more rate hikes would be coming in 2019. Mainland Chinese shares gained on the day, as the Shanghai composite advanced 0.35 percent and the Shenzhen component added 0.706 percent. The Shenzhen composite rose 0.767 percent. In South Korea, the Kospi closed 0.36 percent higher at 2,184.88. Hong Kong's Hang Seng index, however, slipped 0.85 percent, as of its final hour of trading. Japanese stock markets were closed on Thursday for a holiday. Oil edged lower on Thursday but held near 2019 highs, supported by a sharp tightening of global stocks, OPEC production cuts and U.S. sanctions on key producers Iran and Venezuela. International Brent crude oil futures were down 36 cents at $68.14 a barrel around 7:50 a.m. ET (1150) GMT, having hit their highest since Nov. 13 at $68.69 earlier in the session. U.S. West Texas Intermediate crude futures were at $59.76 per barrel, down 47 cents. WTI reached its highest since Nov. 12 earlier in the day, at $60.33 per barrel. Crude prices have been pushed up by almost a third since the start of 2019 by supply cuts led by OPEC, as well as sanctions enacted against Iran and Venezuela by the United States. Gold climbed to a three-week peak on Thursday as the U.S. Federal Reserve ruled out chances of any interest rate hike this year, while a surprise cut in U.S. growth forecast added to concerns on global economic slowdown. Palladium hit a record high on prolonged supply deficit in the market. Spot gold gained 0.5 percent to $1,318.36 per ounce as of 0804 GMT, after touching its highest since Feb. 28 at $1,320.22 earlier in the session. U.S. gold futures jumped 1.3 percent to $1,318.50 an ounce.