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If
there was a word of the year for financial markets, then
"transitory" would be a leading contender. Yet, as 2021
approaches its final stretch, its time too may be over.
Speaking to U.S. lawmakers on Tuesday, Federal Reserve chief
Jerome Powell said it was probably time to "retire" the term
used by many central banks to describe a short-term inflation
surge.
Instead, Powell said a strong economy, stalled workforce growth,
and high inflation that's expected to last into mid-2022, was
reason enough for the Fed to start discussing whether to end
bond purchases earlier than anticipated.
The result? Markets are back to pricing in a first 25
basis-point Fed hike for July 2022, versus September a day ago
and U.S. Treasury yields have resumed their climb.
Working out the Fed's next move is another task for investors --
in addition to assessing how serious an impact the Omicron
coronavirus variant might have on the world economy.
But for now, markets have started December in brighter spirits.
U.S. and European share futures are higher, Asian stocks were
heading for their best day in nearly two months and oil has
rallied around 2%.
The Organization of the Petroleum Exporting Countries meets
later on Wednesday, ahead of Thursday's meeting of OPEC+, which
groups OPEC with other oil producing allies. They will discuss
how to respond to the threat of a hit to fuel demand from the
Omicron variant.
The latest U.S. ISM manufacturing survey, out later this
session, will also be in focus.
Key developments that should provide more direction to markets
on Wednesday:
- Asian factories shake off supply headaches but Omicron
presents new risks.
- Suncity shuts VIP gaming rooms in Macau after CEO's arrest
-sources
- Prepare sanctions on Russia and ramp up military cooperation,
Ukraine tells NATO -
- Australia economy's Q3 slump not as bad as feared, recovery
underway
- Bank of England Governor Andrew Bailey speaks
- Federal Reserve Beige Book of economic condition
- Final manufacturing PMIs euro zone
- Emerging markets: Korea exports; PMIs in several countries
- ADP private payrolls/ISM PMIs
- Earnings. Trip.com, Royal Bank of Canada, National Bank of
Canada, Snowflake, Synopsys, Crowdstrike, Veeva Systems, Okta,
Splunk, Elastic, Five Below Graphic: Renewed COVID concerns wipe
$2 trillion off value of world stocks,
https://fingfx.thomsonreuters.com/gfx
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(Reporting by Dhara Ranasinghe; editing by Sujata Rao)
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