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News vacuum sucks momentum out of markets
A Day Ahead View in European and Global Markets from Kevin Buckland
Stock market momentum is slowing as a dearth of new economic runways causes feverish pressure on the pace of Federal Reserve rate cuts to finally ease.
Most Asian stock indexes fell on Tuesday, led by the Hang Seng’s more than 2% retreat from the previous session’s multi-month high. Japan’s Nikkei stood out as the sole beneficiary of the Nasdaq’s overnight record for Nvidia’s much-anticipated earnings on Wednesday.
AI craze aside, the Fed is squarely at the center of the market universe, with all asset classes in its orbit. These include crude oil, gold and base metals, and the rise of cryptocurrencies, even though idiosyncratic factors are also at play.
Investors rushed to reintroduce Fed easing bets after a long-running negative CPI surprise last week, but Fed officials have been less optimistic, collectively adopting a cautious stance.
In the current situation, around 40 basis points of easing are planned for this year, with a reduction of a quarter of a point by November considered a blockade, just as the probabilities were a week ago.
More Fedspeak is in store today, with Governor Christopher Waller and no fewer than four regional Fed chiefs taking the podium at various events. The minutes of the Fed’s latest monetary policy meeting, scheduled for Wednesday, will be valuable, but it predates the CPI slowdown after three consecutive months of positive surprises.
Elsewhere, Bank of England Governor Andrew Bailey gives a talk at the London School of Economics. The UK CPI will be closely monitored, but will only be released on Wednesday.
Tuesday’s local data is weak, with the highlight in Europe being German producer price figures for April.
Key developments that could influence markets on Tuesday:
-Producer prices in Germany (April)
-BoE Governor Andrew Bailey speaks
-Fed Governor Waller, New York Fed Williams, Atlanta Fed Bostic, Cleveland Fed Mester, Boston Fed Collins, Richmond Fed Barkin speak at various events
(Edited by Stephen Coates)