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Minutes from the Fed's last meeting indicated the U.S. central
bank is not yet contemplating bigger, 75 basis-point rate rises.
That, alongside softer economic dataprints, is inducing money
markets to keep dialling back their view of where the Fed funds
rate may peak.
The implied yield on the eurodollar futures June 2023 contract
-- essentially where markets see interest rates to be at that
point -- is down some 60 basis points this month. And the
September 2023 implied yield has fallen below 3% for the first
time since March.
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JPMorgan notes too that global inflation (ex-Turkey) slowed in
April to half the 1.2% month-on-month record set in March. Yet,
policymakers are not convinced; South Korea delivered a
quarter-point interest rate rise on Thursday and flagged more
ahead, hot on the heels of an aggressive move in New Zealand a
day earlier.
A retreat in U.S. Treasury yields -- 10-year borrowing costs are
at mid-April lows -- has offered some encouragement to stock
markets, with European markets gaining and futures tipping a
firmer Wall Street open.
But the mood remains lacklustre. Is recession the explanation?
The Institute of International Finance reckons so, halving 2022
global growth forecasts to 2.3%. That amounts essentially to a
recession call, once population growth is accounted for.
Prices for oil and industrial metals, normally reliable
recession barometers, are distorted by supply shortfalls --
millions of barrels of Russian oil are off the market and copper
is experiencing significant deficits.
Despite growth-crimping interest rate rises worldwide, Brent
crude futures are holding firm near $115 a barrel. That's
spurring workers -- whether German metal-workers, UK rail
employees or Silicon Valley staff -- to agitate for higher pay..
Key developments that should provide more direction to markets
on Thursday:
-Japan's corporate service prices rise at fastest pace in over 2
years
-Economic data: U.S. Q1 core PCE index, weekly jobless claims
-Turkey's central bank to hold rates
(This story corrects para 2 to show June implied yield is down
60 bps (not 80 bps) and Sept yield below 3% first time since
March (not February). No other changes to text)
(Reporting by Sujata Rao; editing by Karin Strohecker)
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