Morning Show: ‘Unconfident’ Powell drags markets lower

Federal Reserve Chair Jerome Powell reacts to introductory remarks before speaking on “Monetary Policy Challenges in the Global Economy” during the International Monetary Fund’s annual research conference on “Global Interdependence” in Washington, US, November 9, 2023. REUTERS/Kevin Lamarque Obtaining licensing rights

A look at the day ahead in European and global markets from Ankur Banerjee

A sea of ​​red awaits Europe as investors abandoned any attempt to rally in riskier assets, after Federal Reserve Chairman Jerome Powell made clear that tackling inflation remains the central bank’s primary concern and warned that raising interest rates is still on the table.

Since the Federal Reserve left interest rates unchanged last week, markets have become increasingly confident that a peak in US interest rates was on the horizon. But Powell stepped up to crush any hopes of an imminent rate cut.

“[The Fed] Powell said the bank is committed to achieving a monetary policy stance that is sufficiently restrictive to bring inflation down to 2% over time.

“We are not confident that we have achieved such a position. If it becomes appropriate to tighten the policy further, we will not hesitate to do so,” he added.

That sent stocks lower, with MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) falling 1% to its lowest levels in a week. Futures indicated that the gloomy mood is set to continue on European bourses.

European Central Bank President Christine Lagarde is scheduled to speak in a fireside chat later today and traders will be weighing every word.

US Treasury yields rose overnight on Powell’s comments, as well as a weak $24 billion auction of 30-year Treasuries. In Asian hours, yields remained high.

See also  Powell decided to raise interest rates by half a percentage point

The rise in yields supported the dollar, which is heading for its best week against the yen in three months.

U.S. interest rate futures put a 60% chance of a rate cut at the Federal Reserve’s June 2024 meeting, according to the Chicago Mercantile Exchange’s FedWatch tool. Those odds were about 70% before Powell spoke.

Meanwhile, the Industrial and Commercial Bank of China in the United States was hit by a ransomware attack that disrupted trading in the US Treasury market on Thursday.

Movie buffs knew they would have to wait for some of their most anticipated films. Walt Disney Co. postponed the release of the Marvel movie “Blade,” the new “Deadpool” sequel and several other films on Thursday, as Hollywood studios adjusted schedules following the end of a four-month actors’ strike.

Reuters graphics

Key developments that may impact markets on Friday:

Economic Events: September UK GDP, Q3 UK GDP, October CPI data for Norway and Sweden

Speakers: European Central Bank President Christine Lagarde, European Central Bank policymaker Joachim Nagel, and Swiss Central Bank Governor Thomas Moser.

Ankur Banerjee reports; Edited by Edmund Claman

Our standards: Thomson Reuters Trust Principles.

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