December 1, 2021
  • December 1, 2021

Marketmind: A week of central banks | The powerful 790 KFGO

By on November 1, 2021 0

A look at the day ahead from Sujata Rao.

It’s hard to believe that just over a month ago, the Fed’s first rate hike wasn’t expected until January 2023. Goldman Sachs is among those now predicting a hike next July, pushing forward the forecast one year after the core US PCE index – the Fed’s preferred measure of inflation stood at 4.4% on an annualized basis.

A rate hike in the euro zone in July? Very unlikely, even though headline inflation is 4.1%, it is nonetheless fully priced.

All of this makes for a scintillating week for central bank watchers, with the Fed likely announcing a slowdown, the Bank of England raising interest rates, with Norway signaling its second rate hike of the year. The most interesting could be the Reserve Bank of Australia, which could revise its forecasts after letting its 3-year bond yield exceed the target 0.1% last week.

Bond markets are calmer this morning – the Aussie yield is down more than 22bp, after rising 90bp last week.

The stock markets got off to a good start, with the Japanese Nikkei advancing 2.3% after an unexpected and comfortable election victory by Prime Minister Fumio Kishida. European stocks are opening higher and Wall Street futures are pointing north.

The company’s results are also cheering, with analysts raising their earnings expectations – among other things, Ryanair announced its first quarterly profit since before COVID-19 and Pandora jewelry store increased its sales and profit margin outlook for the year.

However, there is no shortage of headwinds for growth. After US GDP was lower than last week’s forecast, another recall from China on Monday, with industrial activity down for the second month, while German retail sales fell 0.9% per year against forecasts an increase of 1.8%.

Finally an interesting nugget from BofA that highlights mentions of supply chain issues in Q3 earnings calls increased 412% year over year.

(For supply chain mentions graphic – https://fingfx.thomsonreuters.com/gfx/mkt/zdvxormoapx/supplychains.PNG)

Key developments that should provide more direction to markets on Monday:

-Biden to tout ‘biggest investment’ in climate in Glasgow

-Asian factories shake lockdown blues, now face supply headaches

– China has lowered oil prices with forecasts that it will free up gasoline and diesel reserves

– Britain warned France on Monday to back down in a row of fish

-Start of the International Energy Forum conference – 2 days

(Reporting by Sujata Rao)