Morning Bid: Markets ‘Fed Up’

Traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. September 13, 2022. REUTERS/Andrew Kelly

A look at the day ahead in European and global markets by Anshuman Daga

No pain no gain.

That seems to be the message from the Fed as it made sobering forecasts and laid the groundwork for its interest rates to rise faster and to higher levels than expected. Continue reading

That sent Asian equities to two-year lows, the dollar to a new two-decade high and government bond yields higher.

BlackRock, the world’s largest wealth manager, expects the Fed to hike rates a few more times, with the data determining the “truth” of that and how long it has to go.

Rick Rieder, who leads BlackRock’s investment team for global allocations, says that with slower economic growth, the question now is when will the economy “fed up” with rising interest rates and tighter liquidity and start to demand relative to to adapt to these much tighter monetary conditions.

Meanwhile, as sterling hit a fresh 37-year low of $1.1225, the only hope for remaining sterling bulls may be a massive Bank of England hike.

While economists polled by Reuters last week expect the central bank to announce rates will rise to 2.25% from 1.75% by 1200 GMT, financial markets have a bigger move to 2.5 % priced in. Continue reading

It’s true that inflation has just hit a 40-year high, but the UK is still grappling with a free-spending government, slower growth and a tight labor market.

Elsewhere, the Norwegian central bank is widely expected to hike rates today by 50 basis points to 2.25%, the highest level since 2011. read more

However, the Swiss National Bank is expected to join the 75 basis point rate hike club in a bid to stave off nearly three decades of high inflation. Continue reading

In Asia, the focus was on the Bank of Japan, which maintained its ultra-loose monetary policy and dovish policy stance, remaining an outlier in a wave of central banks raising interest rates to combat rising inflation. Continue reading

Key developments that could impact markets on Thursday:

Central Bank Meetings: Swiss National Bank, Norwegian Central Bank, Bank of England

Economic Data: US Weekly Jobless Claims

Reporting by Anshuman Daga

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