Both the stock and currency markets remain in consolidation mode

Our Comments and Expectations

External backdrop. U.S. markets were fully focused yesterday on comments from the new Federal Reserve Chair, Kevin Warsh. This was clearly reflected in market behavior: the S&P 500 barely moved until the start of the press conference at 11:00 PM Kazakhstan time, after which the index declined noticeably. The speech was interpreted as hawkish. Warsh declined to provide the market with the usual guidance regarding the future path of interest rates, removed all references to potential rate cuts, and emphasized that the Federal Reserve is “unequivocally and unanimously” committed to bringing inflation back to 2%. Following the meeting, expectations for unchanged rates through year-end declined sharply, while futures markets began pricing in nearly a 90% probability of at least one rate hike. In addition, projections from other Fed officials showed that nine policymakers expect at least one rate increase and six expect at least two. Another nine expect either no rate hikes or even a rate cut. The Federal Funds Rate itself was left unchanged for the fourth consecutive meeting. European markets closed broadly flat, as investors did not wait for the Fed Chair’s remarks. However, positive developments emerged after the close. Donald Trump signed a temporary agreement with Iran aimed at ending hostilities and reopening the Strait of Hormuz. Meanwhile, shipping activity through the Strait is showing signs of recovery. The number of vessels traveling east-to-west reached six yesterday and seven today, comparable to levels last seen on April 12. Asian markets are mixed this morning. Japanese and South Korean indices are advancing, while Hong Kong continues to decline.

S&P 500 futures are up 0.8%, while oil prices have fallen below $78 per barrel.

KASE Index. Consolidation in the KASE Index continues. The benchmark once again closed with little change, and none of the index constituents recorded gains or losses exceeding 1%.

Index constituents. Air Astana, Kcell, KazMunayGas, and Kaspi posted modest declines yesterday. The largest drop was recorded by KazTransOil. On AIX, Solidcore shares moved lower as gold prices failed to break above their 200-day moving average following the hawkish comments from the Fed Chair. At today’s market open, Kcell is showing the largest decline, while most other stocks remain close to neutral territory. Most GDRs and ADSs also ended lower, although they may recover part of those losses today following the peace agreement between Iran and the United States. At the opening of the London Stock Exchange, Air Astana’s GDRs are up 3% and have reached their highest level since February.

Currency. Consolidation is also continuing in the foreign exchange market. USD/KZT is trading slightly below KZT 488 this morning, with no significant changes. Meanwhile, the Russian ruble continues to weaken against the U.S. dollar.