Marketmind: Fed up waiting

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

The would-they-won’t-they saga of the Fed possibly hinting it will go slow with further rate rises is about to reach its climax on Wednesday. The market widely expects a fourth straight 75 basis-point hike, but what comes next has arguably been the bigger issue on investors’ minds over the past month.

With several parts of the U.S. Treasury yield curve pointing to a possible recession even as data continues to show a still-strong economy, comments from Fed Chair Jerome Powell will take the spotlight. There is a chance, according to analysts, that the central bank may stick to its aggressive tightening path for rates as a result of the still-tight labour market and lack of any signs of an easing in core inflation.

Markets want signs of a pivot, ING economists said. “And that augurs for some euphoria if it is received, but misery if not.”

While the U.S. dollar slipped on the day and has come off an over-two-decade peak it hit in September, the greenback still has enough strength to resume its relentless rise, according to a poll of currency strategists, while investors remain reluctant in betting on a sustained decline.

In Asia, Hong Kong and China stocks continued their ascent, a day after social media rumours that China was planning a reopening from strict COVID curbs next year triggered a sharp rally.

The rumour was shot down but suggests battered China shares were primed for a rebound on any signs of positive news. Also helping sentiment were upbeat remarks made by Chinese regulators at Hong Kong’s investment conference, the biggest corporate event in the city since it shut its borders in 2020.

On the corporate side, billionaire and Twitter owner Elon Musk is making changes to how accounts get verified, tweeting that the social media firm will charge $8 a month for its Blue service, which includes its sought-after “verified” badge.

Key developments that could influence markets on Wednesday:

Economic events: Germany Oct unemployment; Europe Oct final PMIs; Fed concludes two-day meeting, with statement at 1800 GMT

Auctions: Germany green bond sale, France, Spain

Earnings on the deck: Ferrari (NYSE:), GlaxoSmithKline (NYSE:), NY Times, Qualcomm (NASDAQ:) Inc as well as eBay (NASDAQ:)

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