Market Jitters Central Bank: Asian shares edged lower on Monday in anticipation of a pivotal week dominated by central bank meetings and crucial U.S. inflation data. Market hopes for swift rate cuts in the coming year hang in the balance.
An optimistic payrolls report has tempered expectations for a March cut by the Federal Reserve, with May still holding at a 76% likelihood.
The Fed is expected to maintain rates this week, placing emphasis on the “dot plots” for rates and Chair Jerome Powell’s press conference.
Tuesday’s consumer price report for November will sway the outlook, with analysts projecting an unaltered headline rate and a 0.3% uptick in the core.
John Briggs, Global Head of Strategy at NatWest Markets, anticipates a Fed-friendly CPI report but expects the policy statement to signal a reluctance to abandon the tightening bias.
Investors tread cautiously with so much at stake. MSCI’s Asia-Pacific index outside Japan eased by 0.65%. Japan’s Nikkei rebounded 1.6% after a 3.4% dip last week.
Chinese blue chips slid 0.9%, touching five-year lows due to a 0.5% drop in consumer prices in November.
Eurostoxx 50 and FTSE futures remained steady, while S&P 500 futures and Nasdaq futures showed minor fluctuations.
The Treasury market faces a test with $108 billion in new supply. 10-year note yields held at 4.24%, having risen post-Friday’s jobs report.
Currency markets focused on the yen amid speculation of changes in the Bank of Japan’s policy. The dollar nudged up to 145.56 yen.
The dollar performed well against the euro at $1.0767, pressured by expectations of early ECB rate cuts.
In commodities, gold declined to $1,998 an ounce post-jobs report. Oil prices edged higher after a 3.9% drop last week, finding support in Washington’s announcement to rebuild strategic oil reserves.
The COP28 climate summit’s outcome, aiming to phase out global fossil fuel use, and central bank decisions add complexity to the week’s dynamics
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Our Reader’s Queries
What is market jitters?
Market jitters are characterized by heightened anxiety and uncertainty among those involved in the market. This state is often caused by unpriced risk and uncertainty in response to economic changes, shocks, or negative market psychology. To put it simply, market jitters occur when the market experiences a sense of unease and unpredictability.
What is the meaning of economic jitters?
Investors experience market jitters when they sell stocks and bonds due to fear and anxiety. The term ‘jitters’ refers to nervousness and apprehension, which is precisely what investors feel during market fluctuations. This nervousness and fear can lead to a significant impact on the market, causing further instability.
How does the central bank affect the stock market?
Monetary policy is the tool used by central banks to regulate the supply of money. This is done by buying or selling securities in the open market. The impact of these open market operations is felt in the short-term interest rates, which in turn affect the longer-term rates and overall economic activity. By adjusting the supply of money, central banks can influence the economy and steer it towards growth and stability.