A look at the day ahead in European and global markets from Kevin Buckland
Bets for a U.S. Federal Reserve rate cut next week sit unequivocally at the centre of the market’s focus right now, as does the murkiness of the economic data Fed officials depend on to make their policy decisions.
With questions over the health of the labour market front of mind at the Fed, the most important data point – monthly payrolls figures – will come in the middle of December instead of today, after the previous month’s numbers were never released at all.
That’s, of course, the result of the record-long government shutdown. But at least the Fed will get key data pertaining to the other side of its employment-nurturing, inflation-taming mandate today with the delayed release of the PCE deflator, among the Fed’s favoured price statistics, although the data is for September.
Bets on a quarter-point reduction by the rate-setting FOMC on Wednesday have climbed to 87%, according to the CME Group’s FedWatch tool, firming over the past week after the private ADP jobs report showed a surprise decline in payrolls for November.
Although weekly jobless claims fell to a three-year low in data on Thursday, economists say the numbers were likely skewed by the Thanksgiving holiday.
As a result, the dollar index is languishing near a five-week low, and stock markets globally are getting a tailwind.
Beyond the near-sure-thing of a Fed cut this month, markets are hungry for clues about possible reductions next year, and that will be a key focus for Chair Jerome Powell’s post-meeting press conference.
But it’s not the only lead on the longer-term rates outlook, after President Donald Trump earlier this week presented White House economic adviser Kevin Hassett as a potential Fed Chair when Powell’s term ends in May.
An FT report said bond investors expressed concerns to the Treasury over the possibility of Hassett as head of the central bank, predicting he would aggressively cut rates to align with Trump’s preference for significantly easier policy settings.
Fed officials are in a blackout period ahead of the meeting, but markets – as always – need to be on alert for social media posts by Trump.
In Europe today, ECB chief economist Philip Lane chairs a session at a conference on fiscal policy.
The most significant data point in the region is UK home prices for November.
Key developments that could influence markets on Friday:
-UK Halifax house prices for November
-ECB’s Lane chairs session at ECB-IMF conference in Frankfurt
-U.S. PCE deflator for September
(Reporting by Kevin Buckland; Editing by Sonali Paul)
Comments