Marketmind: Absolutely, absolutely! By Reuters
© Reuters. FILE PHOTO: A London bus drives past the Bank of England in London, Britain October 10, 2022. REUTERS/Hannah McKay
A preview of the day ahead in the European and global markets of Ankur Banerjee
All parties in the UK gilt markets are holding firm. Prime Minister Liz Truss is “absolutely” committed to her spending plans, the Bank of England is absolutely determined to end its bond buying by Friday and the markets are completely unconvinced of stability and calm.
The pound is recovering, but volumes have thinned in a market tired of the turmoil, and gilt yields are at their highest levels in two decades. If that wasn’t enough to worry about, August GDP data showed the UK is on the brink of recession.
It may be the BoE that will be forced to blink if the pension fund rebalancing it wants to see happen by Friday doesn’t happen.
Ray Attrill of National Australia Bank (OTC:) said “the Bank will necessarily be there if market conditions demand it” as any central bank‘s financial stability mandate will trump the macro mandate. economic. Still, he points out that this may not mean the BoE is continuing to buy gilts in conflict with its inflation target.
Meanwhile, investors are eagerly awaiting US inflation data for September later Thursday. Core inflation is expected to increase by 6.5% year-on-year. The numbers will be another read on how the Fed is likely to continue with its rate hike plans.
A reading of last month’s policy meeting showed the Fed was more concerned about doing too little than too much on inflation, agreeing it needed to raise interest rates to a more restrictive level and then hold them there. for a certain time.
Coming for attention is another central bank with a dilemma on the other side of the world.
As the yen broke 24-year lows and Japan repeated its usual stance that it is on guard to take appropriate action against excessive volatility in the forex market, investors are still not ready to bet against the Bank of Japan‘s yield curve policy.
Key developments that could influence markets on Thursday:
Economic events: CPI data from Germany and Sweden, inflation data from the United States
Speakers: BOE’s Sarah Breeden, Federal Reserve Board Governor Michelle Bowman, World Bank Group President David Malpass, IMF’s Kristalina Georgieva and US Treasury Secretary Janet Yellen will speak at various events
Gains on deck: Chipmaker TSMC, Blackrock (NYSE:) and Infosys (NYSE:)