Global Stocks Buoyant as Investor Fears Subside
Global stock markets experienced strong rallies yesterday as investors shrugged off recent banking sector failures and piled back into equities.
A good start to the day in Asia and Europe was built on by the US markets, with the three major indices all recording significant increases at the close, the Dow was up 0.98%, the S&P was up 1.3%, and the Nasdaq was up 1.6%. The dollar dropped on the day but remained mostly within the month’s ranges, and Treasury yields gained some ground.
Fed Focus for Markets
Expect global markets to remain relatively peaceful for the majority of the day’s trading sessions as investors prepare for probably the most anticipated Fed rate announcement in history—well, maybe not history, but it is very important. The market is now fully backing a 25 bps hike, with it priced in as an 85% chance, so anything other than this will see some wild moves across financial products. Rate hike expectations have dropped as dramatically as some bank stocks in the last couple of weeks as market turmoil has led to a serious change in anticipated Fed moves. If we get the predicted 25 basis points, the statement, and press conference will have a greater market impact, and if the Fed changes little in their recent rhetoric expect the dollar and yields to take off once again.
Calm Before the Fed Storm
It’s expected to be a quiet day ahead for most markets before we hit the US session, and the economic data calendar is doing nothing to dispel that theory. The Asian session is looking extremely quiet, with little in the way of releases due, and is expected to take its lead from a strong US session while remaining cautious ahead of the Fed. There will be a spark of non-US interest at the start of the London session with the latest CPI numbers due out of the UK, expectations remain high with the y/y number anticipated at 9.9%; this comes a day before the next BOE Rate call. But the big event comes towards the end of the US session with the highly anticipated Fed Rate announcement, Statement, and Press Conference.
