Economy

Stocksaksaks are closer to fine

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© Stocksak. A general view of the European Central Bank (ECB), building in Frankfurt, Germany, October 27, 2022. REUTERS/Wolfgang Rattay

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Tom Westbrook gives a look at the day ahead on European and global markets.

After jumping the gun a few times the markets are pricing in a pivotal in monetary policies and might be getting closer.

Bonds are celebrating this week’s slowing of the Bank of Canada’s hike speed. This suggests the European Central Bank is closer to being satisfied with its progress. Ten-year Italian BTPs have had their best week in a decade with yields falling 73 basis points from Friday’s close.

Australia’s inflation rose to a 32-year high this past week. Ten-year government bonds had their best week in 16 years. The market was convinced that the central banks will keep its 25-basis-point hike size.

Mixed, but mostly disappointing results from U.S. tech giants add to the evidence that the slowdown central bankers have been trying to engineer in the real economy. The U.S. Dollar has made a rare retreat this week.

Chevron (NYSE:) Exxon Mobil (NYSE:) reports in the U.S. on Friday. Earnings are reported in Europe by Volkswagen (ETR) and French fund-management firm Amundi.

Asia’s bargain-hunter rebound seems to have ended in Hong Kong, and stocks dropped. The Bank of Japan did not change its policy settings, as expected.

Euribor and Fed Funds futures saw overnight gains into Asia, which is quite unusual. After flirting with the 5% mark a week ago, markets now expect a peak in Fed funds rates at 4.8%.

Ironically, these moves could even decrease the likelihood of a pivot from the Fed or a hint about a pivot-ish hint.

Lower bond yields may lead to financial conditions being more favorable. This could make the Fed more hawkish than dovish. Treasuries are joining the global rally, with 10-year yields falling by nearly 30 bps this week.

Friday’s market developments are key.

Economics: Germany, France preliminary GDP. Eurozone consumer confidence. U.S. consumer sentiment. Personal income and spending. Core PCE

Earnings: Caixabank, Volkswagen, Amundi, NatWest, Danske Bank, Sanofi (NASDAQ:), Saab, Swiss Re (OTC:), Chevron, Exxon Mobil

News Source and Credit

Stocksak Editorial

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