Morning Deal: Whack-a-mole at the Markets

Traders work on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., May 19, 2022. REUTERS/Andrew Kelly

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A look the next day at the Saikat Chatterjee markets.

As investors obsess over what the world’s largest central bank might do, the uneasy calm that prevails in global markets is under threat.

First, Russia has moved closer to default after the United States said it would not extend a waiver that had allowed Moscow to pay US bondholders. Read more.

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Second, North Korea likely fired an intercontinental ballistic missile on Wednesday, hours after US President Joe Biden finished his trip to Asia.

And in Britain, a report by civil servant Sue Gray on the lockdown-breaking events at Downing Street may be published later that day, mounting pressure on Prime Minister Boris Johnson, who is facing a sharp slowdown in the UK economy. United.

For now, the markets appear to be overlooking these developments. Asian stocks rose while European and US stock futures are in the green, mainly due to a pullback in US Treasury yields, where 10-year borrowing costs are near the lowest in almost one month.

But that drop is due to a series of lackluster PMI and housing data that point to a cooling economy.

In currency markets, the New Zealand dollar was the standout gainer, following an interest rate hike of 50 basis points (expected) and a more dovish-than-expected tone from the central bank.

The US dollar remains just below one-month lows as weak data forced traders to back off some of their aggressive bets on monetary tightening. Money markets now see around 131bps of rate hikes over the next three meetings, down from 145bps at the start of the week.

And Atlanta Fed President Raphael Bostic has sounded a warning that precipitous rate hikes carry the risk of “significant economic dislocation.” Read more. Markets will now be watching the minutes from the latest Fed meeting, due out later on Wednesday.

Key developments that should provide markets with more direction on Wednesday:

Speakers’ Corner: ECB President Lagarde, Rehn, Panetta, Holzmann, de Cos and Lane, BoJ Governor Kuroda, Fed Vice President Brainard, and BoE Policy Officer Tenreyro.

Data: US data for April on Durable Goods Orders and Core Capital Goods Orders.

TotalEnergies agrees to buy 50% of the US renewable energy company Clearway read more

king dollar
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Information from Saikat Chatterjee; edited by Sujata Rao

Our standards: the Thomson Reuters Trust Principles.

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