Inflation ‘blip’ or brave new world? | – #Inflation #blip #brave #world
From Mike Dolan USA and an outlook on the day ahead in global markets
Friday in world markets USA and Europe there was uncertainty over whether the sharp repricing of the interest rate horizon over the past month was an overreaction and whether the New Year’s economic burst could be a temporary effect.
Many central bank officials certainly seemed less quick to make decisions. USA Federal Reserve officials on Thursday inflationwrestled with whether recent data showing jobs and spending were hotter than expected was a glimmer in the pan.
Fed Governor Christopher Waller said, “It is possible that progress has stalled, or that the numbers released last month were a flashpoint.” Atlanta Fed President Raphael Bostic called for a “slow and steady” policy response course.
The comments, which come ahead of Fed Chairman Jerome Powell’s testimony to Congress next week and the critical February jobs report, calmed horses in markets where interest rates have been rising all week.
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It followed comments from Bank of England Governor Andrew Bailey earlier in the week that further interest rate hikes in the UK were not “inevitable”.
In two-year Treasury yields, nearly 15-year highs 10 The base point pullback was enough to give stocks a boost through Thursday and into the weekend. Ten-year Treasury yields are only about to stick to the 4% mark they took on Thursday.
Stock markets’ greater resilience to the week’s bond market earthquake is notable and somewhat puzzling – while bond implied volatility (.MOVE) is up sharply, stock market equivalents (.VIX) are down.
One argument for this is that central banks can actually avoid pushing economies into recession and accept slightly higher levels of inflation. Two-year in the US Treasury market inflation expectations have risen to 3% from 2% since the beginning of last month.
Moreover, the proxy Fed funds rate modeled by Fed researchers — which shows the true level of policy tightening when you include Fed guidance, market transmission and use of the Fed’s balance sheet — was already as high as 6.3% at the end of February. This is 170 bpd above the current policy rate.
There was some marginal cooling in the business surveys coming in on Friday as well. The recovery in business activity in the euro zone accelerated last month, but was slightly less warm than the first “flash” readings.
On the other hand, activity in China’s service sector expanded at its fastest pace in six months.
Elsewhere, there were some concerns about central banks’ own powers. British lawmakers said on Friday they had launched an inquiry into how the Bank of England’s operational independence works.
In corporate news, shares of India’s embattled Adani were given a group surprise 1.87 by boutique investment firm GQG Partners billion dollars after investing, of the conglomerate funds on Friday after allaying concerns about its ability to attract 20% increased. GQG Partners’ Australia pension The fund’s client queried him for more information on the company’s actions.
Owned by Japan’s SoftBank (9984.T). Britain the chip technology firm said on Friday that it will list only in the US this year and Britain dashed his government’s hopes that the tech giant would return to the London Stock Exchange.
Bank at work Bank of America BAC.N and Citigroup have joined their global peers in cutting some of their investment banking jobs in Asia as deals with China slow.
Key developments that could guide US markets on Friday:
* US and global February service sector surveys
* US Federal Reserve Board Governor Michelle Bowman, Atlanta Fed President Raphael Bostic, Dallas Fed President Lorry Logan and Richmond Fed President Thomas Barkin speak.
* US President Joe Biden He met with German Chancellor Olaf Scholz at the White House
* Foreign ministers of four countries – USA, Japan, Australia and India – meet in New Delhi
Part of VIX and MOVE paths?Fund Flow: Global Stocks, Bonds and Money MarketsReuters GraphicsReuters GraphicsBy Mike Dolan Editing by Jane Merriman [email protected]. Twitter: @reutersMikeD
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2023-03-03 15:28:53
Source – reuters
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