A look at the day ahead in European and global markets from Tom Westbrook
Stocks are up, U.S. interest rate expectations are getting tweaked lower and yields are in a downdraft after a handful of Fed officials suggested that a weeks-long run-up in yields might be bolstering their fight against inflation.
Bankers applauded in Nashville when Atlanta Fed President Raphael Bostic said on Tuesday he thought rate rises had gone far enough and hope is flowing, again, for a peak in rates.
Futures pricing suggests traders now see about a 30% chance of another rate hike this year, down from about 45% a week ago.
Benchmark 10-year Treasury yields were steady in Asia – down 15 basis points for the week so far at 4.64% – and regional stocks scaled two-week highs as risk sentiment attempted a recovery after getting beaten down in recent weeks.
The dollar has also been yanked from near one-year highs.
Conflict in the Middle East and jittery energy prices speak to elevated nerves: European gas prices hit a seven-month high on Tuesday on news that Finland suspects a pipe joining an LNG terminal with Estonia might have been damaged deliberately.
Ahead on Wednesday, the European Central Bank’s inflation survey and U.S. producer price data will lead in to U.S. inflation data on Thursday.
The S&P 500’s retreat on Tuesday from the day’s high, closing only 0.5% firmer, also suggests nervousness.
Later in the week U.S. corporate earnings season hits full swing, with bank profits set to rise. Overnight markets welcomed Pepsi promising to keep on lifting prices, which is a good sign for demand but perhaps a warning sign for inflation.
People familiar with the matter said Exxon Mobil is set to make an all-stock offer for U.S. rival Pioneer Natural Resources valuing it at $60 billion.
Key developments that could influence markets on Wednesday:
– IMF, World Bank meetings in Marrakech, Morocco
– ECB inflation survey, U.S. PPI
– Fed’s Bowman, Bostic, Waller, Collins all speak
(Reporting by Tom Westbrook; Editing by Edmund Klamann)
