U.S. Federal Reserve Chairman Jerome Powell responds to opening remarks before discussing “Monetary Policy Challenges in a Global Economy” during the International Monetary Fund (IMF) Annual Research Conference on “Global Interdependence” on November 9, 2023 in Washington, United States ” speaks. Portal/Kevin Lamarque acquires license 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 at a rally in risk assets after Fed Chairman Jerome Powell made clear that fighting inflation remained the central bank’s main concern and warned that interest rate hikes were still on the cards be table.
Since the Fed left interest rates unchanged last week, markets have been increasingly confident that the peak in US interest rates was in sight. But Powell stepped in to dash any hopes of an impending rate cut.
“[The Fed] “is committed to achieving a sufficiently tight monetary policy stance to bring inflation down to 2% over time,” Powell said.
“We are not confident that we have achieved such a posture. If it is appropriate to further tighten the policy, we will not hesitate to do so.”
That sent share prices lower, with MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) falling 1% to its lowest level in a week. Futures suggested that the gloomy mood on European stock markets would continue.
ECB President Christine Lagarde will speak in a fireside chat later in the day and traders will be pondering every word.
U.S. Treasury yields rose overnight on Powell’s comments as well as a weak auction of $24 billion in 30-year Treasury notes. In the Asian hours, yields remained elevated.
The rise in yields gave a boost to the dollar, which is heading for its best week in three months against the yen.
U.S. interest rate futures have priced in a 60% chance of a rate cut at the Fed’s June 2024 meeting, according to the CME’s FedWatch tool. That probability was about 70% before Powell spoke.
Meanwhile, the US arm of the Industrial and Commercial Bank of China was hit by a ransomware attack on Thursday, disrupting trading in the US Treasury bond market.
Movie fans have learned that they will have to wait for some of their most anticipated films. Walt Disney (DIS.N) on Thursday postponed the release of the Marvel film “Blade,” a new installment of “Deadpool” and several other films as Hollywood studios adjusted their schedules following the end of the four-month actors’ strike.
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Key developments that could impact markets on Friday:
Economic Events: September UK GDP, Third Quarter UK GDP, October CPI data for Norway and Sweden
Speakers: ECB President Christine Lagarde, ECB politician Joachim Nagel, SNB boss Thomas Moser
Reporting by Ankur Banerjee; Edited by Edmund Klamann
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