Wayne Cole Market Watch: This week takes a decisive turn as the Federal Reserve spearheads vital central bank meetings, examining market sentiment on potential early rate adjustments next year.
On Tuesday, the U.S. consumer price report for November holds sway over the outlook, with predictions of an unaltered headline rate and a 0.3% uptick in the core rate.
“Super Thursday” witnesses gatherings of the European Central Bank, the Bank of England, the Swiss National Bank, and Norges Bank alongside the Fed’s Wednesday meeting. Expectations lean toward stability, barring Norway, where a rate hike looms amid the crown’s vulnerability.
Amid discussions, the Swiss National Bank contemplates intervening to curtail the franc’s ascent, hitting a nine-year high against the euro last week.
The ECB session unfolds dramatically, with inflation slowdowns prompting even staunch hawk Isabel Schnabel to adopt an unexpected dovish stance. Analysts anticipate pushback from other hawks, particularly the Bundesbank, against market forecasts for cuts in March or April, posing uncertainties about majority consensus.
For the Fed, focus shifts to the FOMC “dot plots” and whether they maintain 50 basis points of easing in the coming year or consider an upward adjustment. Fed Chair Jerome Powell’s subsequent press conference becomes pivotal, providing a platform to challenge early-cut expectations.
Market adjustments follow a positive payrolls report, diminishing March easing odds to 46%, while a May cut stands at 58%, implying a total of 100 basis points easing for 2024.
Goldman Sachs accelerates rate cut projections to the third quarter of next year, envisioning a 95 basis point ease for 2024 instead of the fourth quarter.
Chinese blue chips (.CSI300) hit five-year lows on a 0.5% drop in consumer prices in November, the sharpest decline since late 2020.
The Treasury market confronts its test with a substantial $108 billion in new supply across various tenures. 10-year note yields, though stable at 4.24%, rose post-Friday’s jobs report, ending the week flat.
Oil prices stabilize after a 3.9% drop to five-month lows, fueled by doubts on OPEC+ commitment to supply cuts. Friday’s announcement of Washington rebuilding strategic oil reserves provides some support.
Eyes also turn to the COP28 climate summit, pioneering a deal to phase out global fossil fuel use.
Lastly, the UK might see a new Prime Minister as Rishi Sunak grapples with a COVID-19 inquiry and a parliamentary vote on his plan to revive a policy of sending asylum seekers to Rwanda.
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