Sell-off fizzles out ahead of Fed, ECB and BoE speeches
Send a link to a friend
[February 07, 2023] By
Marc Jones
LONDON (Reuters) - The steepest market sell-off of the year so far
looked to be fizzling out on Tuesday, as traders waited to see if the
head of the Federal Reserve and a number of top ECB and BoE officials
give any new insights later on where interest rates are heading.
The Australian dollar had already bolted upwards after its central bank
signalled it would keep hiking while the yen went galloping higher after
some unusually strong Japanese wage data.
Europe started more mixed though with the euro and pound both
fractionally lower and only London's FTSE making any real headway out of
the main share indexes as BP became the latest oil giant to post bumper
profits. [.EU]
There was plenty of time for that to change though with two of the ECB's
top policymakers, Isabel Schnabel and France's François Villeroy de
Galhau both making speeches, as well as two Bank of England deputy
governors and its chief economist.
Then comes Federal Reserve Chairman Jerome Powell at the Economic Club
of Washington during U.S. trading plus U.S. President Joe Biden's State
of the Union address.
"It's still all about the central banks, you are still trying to
understand their reaction function," said Sahil Mahtani, a multi-asset
strategist at investment firm Ninety One, pointing to whether borrowing
costs keep going up.
The firm continues to expect recessions to take hold in major economies,
mainly because interest rates in rich countries such as the United
States have gone up at the third fastest rate since the early 1970's
over the last year.
"The market is positioned for a soft landing, we are positioned for a
hard landing," Mahtani said.
Asian stocks had mostly stabilised overnight after they, like most
global share markets, had seen steep losses on Monday following last
week's strong U.S jobs data that bolstered the case for more Fed hikes.
[to top of second column] |
The Federal Reserve building is seen in
Washington, U.S., January 26, 2022. REUTERS/Joshua Roberts//File
Photo
MSCI's broadest index of Asia-Pacific shares outside Japan ended up
0.2% although Australia's S&P/ASX200 ended down nearly 0.5% after
the RBA delivered its ninth consecutive hike and signalled more.
Australia's cash rate now stands at 3.35%, the highest in a decade.
DEADLY QUAKE
Among the main commodities, oil jumped for a second straight session
driven by optimism about recovering demand in China, and after
Monday's devastating earthquake in Turkey had shut down one of the
region's major oil export terminals.
Brent was up $1.74, or 2.15%, to $82.73 per barrel, while West Texas
Intermediate rose $1.70, or 2.29%, to $75.81 per barrel.
Despite the recent gyrations in bond markets, benchmark European
yields on the 10-year German Bund were trading largely where they
were was a week ago at 2.32% on Tuesday.
Italy's 10-year yield was up around 5 basis points on the day at
4.198%, leaving the closely-watched gap between the two at 187 bps.
"Sentiment in markets is dominated by central banks and the
repricing of rates yet again," Kerry Craig, JPMorgan Asset
Management's global market strategist, said.
"Equities have had a strong run since the start of the year so
seeing an air pocket emerge now is no major surprise."
(Additional reporting by Scoot Murdoch in Sydney; Editing by Simon
Cameron-Moore and Jacqueline Wong)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|