Marketmind: Let’s talk rates again

1 min read
A trader works at the Frankfurt stock exchange in Frankfurt

A look at the day ahead in European and global markets from Anshuman Daga

Just as investors were starting to put aside worries of rate increases from the Federal Reserve, the narrative is again shifting to tighter U.S. monetary policy.

In Europe also, policy makers are reminding markets that as long as broad-based inflation is not tamed, rate increases are still on the agenda.

France’s central bank chief said in a speech in Tokyo the European Central Bank will probably keep raising interest rates beyond 2%, but “jumbo” rate hikes will not become a new habit.

The comments came a day after Swiss National Bank Chairman Thomas Jordan issued another rate increase warning, saying it was likely the central bank will need to act again as inflation is set to remain elevated.

Tuesday’s data calendar has jobs figures due from the United Kingdom along with euro zone third-quarter GDP numbers and Germany’s ZEW sentiment index.

News from China was disappointing as data showed factory output grew more slowly than expected and retail sales unexpectedly dropped in October, suggesting the world’s second-largest economy is losing momentum.

Still, investors seemed to pay more attention to the easing of tensions in U.S.-China relations after the heads of the world’s top two economies met on the sidelines of the G20 Summit in Bali, Indonesia.

Asian stock markets advanced, with Chinese and Hong Kong shares – big underperformers so far this year – logging strong gains.

The dollar index was steady after it recovered on Monday from a three-month low struck on Friday.

Meanwhile, Donald Trump is expected to announce another White House bid on Tuesday even as Florida Governor Ron DeSantis is cementing himself as the Republican Party’s top rising star.

GRAPHIC: China’s consumption recovery dragged by COVID curbs (https://graphics.reuters.com/CHINA-ECONOMY/zgvobmmrepd/chart.png)

GRAPHIC: Dollar retreat (https://fingfx.thomsonreuters.com/gfx/mkt/jnpwyegrnpw/One.PNG)

Key developments that could influence markets on Tuesday:

Economic data: UK Sep jobs, Euro zone Q3 employment, GDP flash GDP, Germany ZEW sentiment index

U.S. data: NY Fed manufacturing index, Oct PPI data

Speakers: Federal Reserve Bank of Philadelphia President Patrick Harker

Earnings: Vodafone, Infineon Technologies, Walmart, Home Depot

(Reporting by Anshuman Daga; Editing by Tom Hogue)

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