Marketmind: A week of central banks

A look at the day ahead from Sujata Rao.

It’s hard to believe that just a month or so back the first Fed rate hike was not expected until Jan 2023. Goldman Sachs is among those to now predict a hike next July, bringing forecasts forward a whole year after the U.S. core PCE index — the Fed’s preferred inflation measure – came in at 4.4% annualised.

A euro zone rate rise in July? Highly unlikely, even if headline inflation is at 4.1%, nonetheless it’s fully priced.

All of which makes it an scintillating week for central bank watchers, with the Fed likely announcing a taper, the Bank of England an interest rate rise, Norway signalling its second rate hike of the year. The most interesting might be the Reserve Bank of Australia which could revise its guidance after last week letting its 3-year bond yield bust past the targeted 0.1%.

Bond markets are calmer this morning — the Aussie yield is down more than 22 bps, after rising 90 bps last week.

Stock markets got off to a good start, with Japan’s Nikkei rising 2.3% after an unexpectedly comfortable election victory for Prime minister Fumio Kishida. European shares are opening higher and Wall Street futures are pointing north.

Company results are cheerful too, with analysts upping earnings expectations – among others, Ryanair reported its first quarterly profit since before COVID-19 and jewellery firm Pandora lifted sales and profit margin outlook for the year.

There is no shortage of growth headwinds though. After last week’s below-forecast U.S. Q3 GDP, another reminder from China on Monday, with factory activity shrinking for the second month, while German retail sales dropped 0.9% year/year versus forecasts of a 1.8% rise.

Finally an interesting nugget from BofA which points out that mentions of supply chain issues during Q3 earnings calls were up 412% year-on-year.

(For graphic on supply chain mentions –

Key developments that should provide more direction to markets on Monday:

-Biden to tout ‘largest investment’ in climate in Glasgow

-Asian factories shake off lockdown blues, now face supply headaches

– China knocked oil prices lower with forecast it would release gasoline and diesel reserves

– Britain warned France on Monday to back down in a fish row

-International Energy Forum conference starts – 2 days

(Reporting by Sujata Rao)