finance

‘Not confident’ Powell drags markets lower

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

A sea of red awaits Europe as investors gave up any attempt at a rally in risk assets, after Fed Chair Jerome Powell made it clear that tackling inflation remains the central bank’s main concern and warned that rate hikes are still on the table.

Since the Fed left rates unchanged last week, markets had increasingly grown confident that the peak in U.S. rates was in sight. But up stepped Powell to squash any hopes of an impending rate cut.

“[The Fed] is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time,” Powell said.

“We are not confident that we have achieved such a stance. If it becomes appropriate to tighten policy further, we will not hesitate to do so.”

That led stocks lower, with MSCI’s broadest index of Asia-Pacific shares outside Japan skidding 1% to their lowest in a week. Futures indicated the dark mood was set to continue in European bourses.

ECB President Christine Lagarde is due to talk in a fireside chat later in the day and traders will pore over every word.

U.S. Treasury yields climbed overnight on Powell’s comments, as well as a weak auction of $24 billion in 30-year Treasuries. In Asian hours, the yields remained elevated.

The rise in yields boosted the dollar, which is headed for its best week against the yen in three months. [FRX/]

U.S. rate futures have priced in a 60% chance of a rate cut at the Fed’s June 2024 meeting, according to the CME’s FedWatch tool. Those odds were about 70% before Powell spoke.

Meanwhile, the Industrial and Commercial Bank of China’s U.S. arm was hit by a ransomware attack that disrupted trades in the U.S. Treasury market on Thursday.

Movie buffs learned they will have to wait it out for some of their most-anticipated films. Walt Disney delayed the release of Marvel movie “Blade”, a new “Deadpool” instalment and several other films on Thursday as Hollywood studios adjusted schedules following the end of the four-month actors’ strike.

Key developments that could influence markets on Friday:

Economic events: UK September GDP, UK Q3 GDP, Oct CPI data for Norway and Sweden

Speakers: ECB President Christine Lagarde, ECB policymaker Joachim Nagel, SNB’s Thomas Moser

(Reporting by Ankur Banerjee; Editing by Edmund Klamann)

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