A look at the day ahead from Sujata Rao.
The Fed is out of the way, having announced faster stimulus tapering, signalled three rate hikes for 2022 and upped inflation forecasts. And of the ten central bank meetings scheduled for Thursday, some will deliver rate hikes and most others are likely to flag some form of policy tightening ahead.
Given a hawkish Fed was already pencilled in, the dollar and U.S. yields rose modestly. But its message fired up stocks, especially lifting the tech-heavy Nasdaq more than 2%, the assumption being that long-term yields won’t go too far.
That momentum has carried into Thursday, with world stocks rising, S&P 500 and Nasdaq futures up as much as 0.7% and a pan-European bourse Europe tipped to open almost 2% higher.
Japan’s Nikkei enjoyed its biggest gain in almost seven weeks, helped also by data showing exports up 20.5% from year-ago levels. PMIs though showed a slowdown; the year’s last set of PMI advance readings are due across the rest of the developed world today.
But back on the central banking front, policymakers in Europe may find it hard to ignore risks from the Omicron COVID variant — a 25 basis-point Norwegian rate hike for today has gone from a dead-cert some days ago to a probably after the expansion of COVID curbs.
The Bank of England is in a worse bind, with skyrocketing Omicron cases on one hand and 5%-plus inflation on the other.
In any case, it will end its bond-buying scheme, and the European Central Bank shortly afterwards is expected to flag its pandemic-time programme will expire on schedule in March.
Emerging markets, way ahead of the pack in the rate-rise race, will see Mexico raising rates for the fifth consecutive time. Expect Russia to follow with a 100 bps move on Friday.
But there are exceptions, and Turkey is seen carrying on with rate cuts, despite 20%-plus inflation and a fast-falling currency. Anticipating a 100 bps cut on Thursday, the lira has blown past 15 per dollar, having started 2022 around 7.4.
Key developments that should provide more direction to markets on Thursday:
-Philippines c.bank hold rates; Taiwan, Egypt, Indonesia decisions
– Shimao bonds benefit from news of possible support from Shanghai regulators
-Markit Dec flash PMIs
-Swiss National Bank meeting
-Norges Bank meeting
-Bank of England
-ECB policy meeting
-Turkey, Mexico policy meetings
-U.S. initial jobless claims/Philly Fed index/industrial output
-US earnings: FedEx, Accenture, Adobe
(Reporting by Sujata Rao; editing by Karin Strohecker)
