Morning Bid: Markets cautious, Powell could undermine rate cut bets – Portal

Federal Reserve Chairman Jerome Powell speaks at a press conference in Washington

Federal Reserve Chairman Jerome Powell answers a question during a news conference at the Federal Reserve in Washington, U.S., November 1, 2023. Portal/Kevin Lamarque/File Photo Acquire LICENSE RIGHTS

A look at the day ahead in European and global markets from Ankur Banerjee

With a blockbuster November in the rearview mirror, investors are bracing for a bright start to December in Europe, amid expectations that central banks will soon begin cutting interest rates, despite a “fireside chat” with Fed Chairman Jerome Powell later in the day could spoil the party.

A calendar full of manufacturing PMIs from countries across Europe will provide a clearer picture of the region’s economy, but in the meantime futures point to a higher open for European stock markets.

Data on Thursday from both the euro zone and the U.S. showed inflation easing, fueling expectations for interest rate cuts from central banks, with money markets pricing in rate cuts by the Fed and ECB by more than 100 basis points next year.

The divide between financial markets and central banks has only deepened as central banks resist talks of interest rate cuts while markets take into account comparatively more favorable inflation data in recent weeks.

However, Fed policymaker Christopher Waller, an influential and hawkish Fed voice, caused some turmoil this week, saying he was increasingly confident that inflation would return to its 2% target. This helped encourage markets to take bets on rate cuts.

As the CME FedWatch tool showed, markets are currently pricing in a 46% chance that the central bank will cut interest rates in March. A week earlier the price was 27%.

With that in mind, Powell will be in the spotlight when he takes the stage later on Friday. It remains to be seen whether Powell will stay away from political comments or talk about interest rates. Whatever he says or doesn’t say, it will affect the markets.

In Asia, the final month of the year got off to a slow start: stock prices fell, the dollar was defensive and oil prices continued their recent decline.

In business-related news, Tesla’s (TSLA.O) long-delayed Cybertruck is here. Made from shiny stainless steel and molded into flat surfaces, the vehicle will start at $60,990, more than 50% higher than what CEO Elon Musk touted in 2019.

Portal GraphicsReuters GraphicsReuters Graphics

Key developments that could impact markets on Friday:

Economic events: UK national house prices for November, manufacturing PMI data from France, UK, Germany and Eurozone.

Speakers: Megan Greene, MPC member of the Bank of England, ECB President Christine Lagarde, Fed Chairman Jerome Powell.

Reporting by Ankur Banerjee in Singapore; Edited by Edmund Klamann

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