Marketmind: Not so fast

A look at the day ahead in United States and global markets from Mike Dolan

U-turns are clearly in the air this week, with Elon Musk’s volte face on buying Twitter on Tuesday following Britain’s top rate tax cut reversal and this week’s new-quarter relief bounce in stock markets.

Of course many investors pray global central banks would join the British government and Musk in a similar rethink – but that’s far less likely and reason enough for markets to sober up on Wednesday after the biggest two-day rally on Wall St since the pandemic hit in April 2020.

New Zealand’s central bank became the latest to stick to its guns lifting interest rates to a seven-year high and promising more to come as it struggles to cool red-hot inflation in an over-stretched economy.

British Prime Minister Liz Truss’ speech to her annual party conference is also due and she’s expected to insist the remainder of her fiscal plan remains intact.

Oil price gains this week are also a shot across the bow, with OPEC+ producers meeting in Vienna and looking to agree deep output target cuts despite a tight market.

Still there have been straws in the wind this week and some hopes for an easing of the year’s relentless selloff. The Musk news was just an added spur.

Twitter shares surged more than 20% on Tuesday after filings showed Musk would proceed with his original $44 billion takeover bid, calling for an end to a lawsuit by the social media company that could have forced him to pay up anyway.

The macro backdrop was all about hopes the Federal Reserve would take its foot off the interest rate brake and news that U.S. job openings fell by the most in nearly 2-1/2 years in August encouraged that.

With U.S. September private sector payroll readings from ADP due later – with forecasts for another 200,000 job gains – and Friday’s national employment report also in view, stock and bond markets have resumed a holding pattern. U.S. Treasury yields ticked back higher and futures and European bourses dialled back almost 1%.

The dollar also steadied after this week’s sharp pullback, though there were growing signs its surge this year is causing some concern for U.S. policymakers as well as those overseas.

San Francisco Fed chief Mary Daly said the Fed is paying attention to the impact of the dollar on global growth because slowing growth abroad can feed back into the domestic economy.

“If Europe goes into recession, that’s a headwind; if China falters, that’s a headwind on our growth, and we have to take that into account so that we don’t end up overtightening policy,” she said.

Key developments that should provide more direction to U.S. markets later on Wednesday:

* Global September service sector business surveys.

* U.S. ADP Sept private sector payrolls report; U.S. Aug trade balance

* OPEC+ meeting in Vienna

* U.S. Atlanta Federal Reserve President Raphael Bostic speaks

(By Mike Dolan, editing by XXX mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD. Editing by Jane Merriman)

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