A look at the day ahead in European and global markets by Kevin Buckland
With just hours until one of the most highly anticipated central bank decisions in recent history, traders are still worried about the chances of a super-sized rate cut from the Federal Reserve.
An unexpected rise in US retail sales on Tuesday initially reduced expectations for a 50 basis point cut to kick-start the US easing cycle, but that did not last long. Futures implied odds fluctuated early in the Asian session before stabilizing at around 65%.
How markets position themselves in the final countdown to the Fed’s announcement at 6pm GMT on Wednesday will vary by asset class.
The dollar lost ground, especially against the yen. But short-term U.S. Treasury yields rose.
Stocks were generally weak except in Japan, where prices recovered from Tuesday’s plunge and continued to show a late-day reaction to swings in the yen.
Early indications from European stock futures pointed to small losses.
Expectations for overall Fed easing this year have fallen slightly, but are still leaning towards a pair of 50 bp cuts and a single 25 bp cut over the remaining three policy meetings of 2024 – a very easing proposal as the economy shows few signs of recovery. fear.
The all-important American consumer in particular appears to be in very robust health, with recent figures showing household net worth at a record high and debt levels at their lowest level in 23 years.
From that perspective, a less market-friendly cut of a quarter point could be considered more appropriate.
Eurozone data is quite light ahead of the Fed’s decision, with region-wide inflation figures for August being the main event.
The UK consumer and producer price indices could have a bigger impact. Lest we forget, the Bank of England has its own policy announcement on Thursday.
Key developments that could impact the markets on Wednesday:
-UK CPI, PPI (both August)
-Eurozone HICP (August)
-Swedish unemployment rate (August)
(by Kevin Buckland; editing by Edmund Klamann)
