THE AMERICA ONE NEWS
Jun 2, 2025  |  
0
 | Remer,MN
Sponsor:  QWIKET 
Sponsor:  QWIKET 
Sponsor:  QWIKET: Elevate your fantasy game! Interactive Sports Knowledge.
Sponsor:  QWIKET: Elevate your fantasy game! Interactive Sports Knowledge and Reasoning Support for Fantasy Sports and Betting Enthusiasts.
back  
topic
Zero Hedge
ZeroHedge
1 Feb 2023


NextImg:Futures Dip As Markets Brace For Hawkish Fed Surprise

US stock index futures slipped on Wednesday - after a frenzied late rally into Tuesday’s month-end thanks to a monstrous, $6 billion in Market on Close buy orders - but were off session lows as investors awaited the Fed’s policy decision after a stellar start to the year for stocks amid speculation the central bank will signal a slowdown in the pace of rate hikes.

Futures on the S&P 500 were 0.2% lower, trading around 4083, while Nasdaq 100 futs popped into the green as of 745am ET, with both underlying indexes surging more than 1% on Tuesday. The Nasdaq soared more than 10% in January in a furious short-covering rebound unseen in more than two decades. An index of global stocks excluding the US is making history with a gain of 8.6% last month — the best start to a year on record. Elsewhere, European and Asian stocks rose, the 10-year Treasury yield fell about three basis points and the dollar index dipped before the Fed statement, where it’s forecast to unveil a 25 basis point rate increase.

Among notable movers in premarket trading, Electronic Arts Inc. after the video game maker cut its full-year forecast and announced a six-week delay in the release of its next Star Wars game. Chipmaker AMD rose after the chipmaker gave a sales forecast that was better than feared, helped by gains in the server market. Perennial loser Snap plunged as the social media company gave a weaker-than-expected forecast, saying changes to its advertising products may be “disruptive” to its business. Shares of other companies that get a bulk of their revenue from online advertising, including Meta and Pinterest also dropped. Bank stocks were also lower in premarket trading Wednesday as traders await the Federal Reserve’s interest rate decision. JPMorgan is planning to launch a digital bank in Germany as its second international consumer outpost. Meanwhile, some users of bankrupt crypto lender Celsius Network’s Custody program will be able to withdraw 94% of their eligible assets, according to a court filing. Here are some other notable premarket movers.

Today's key event is the FOMC decision due at 2pm (preview here). Economists widely expect the central bank to raise rates by 25 basis points at the conclusion of its two-day meeting Wednesday. Chair Jerome Powell is likely to keep further hikes on the table while leaning against bets they will cut rates later this year.

"Powell will certainly sound satisfied about the falling inflation and slowing wages, but he will likely point out that inflation remains high, risks to inflation remain to the upside and that the job is not done yet,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “He will surely push back the expectation of any rate cut this year” and a hawkish statement could further weigh on stocks, she said.

Wage cost data that undershot forecasts, a cooling housing market dwindling consumer confidence suggest the Fed’s rate hikes over the past year have begun to curtail inflation, but still-loose financial conditions are complicating the central bank’s task.

"The question is will the Fed emphasize a pause or push back against the easing being priced in for this year and the next,” said Steve Donzé, deputy head of investment at Pictet Asset Management in Tokyo. “The market is worried about this, because a lot of this rally was helped by softer yields and the dollar and if the Fed starts to fight the easing that’s priced in it will have consequences for the yield curve and equities.”

Powell will also try to push back against easing financial conditions which are now as loose as they were in Jun 2022 when Fed Funds were 1.75%.

Focus is also on company earnings, with analysts expecting the first quarterly drop in US profits since 2020. Investors can no longer count on some crucial tailwinds that helped spur a remarkable two-decade stretch of earnings growth, according to Bank of America.

In Europe, the Stoxx Europe 600 index pared most of its early gain after a report showed inflation in the euro area slowed more than economists’ expectations in January. The the core measure remained sticky, however, suggesting heated debate to come at the European Central Bank over how much more interest rates must rise. The central bank is expected to lift its policy rate by 50 basis points on Thursday. Here are some of the biggest European movers:

“Headline inflation continues to fall across the eurozone but core inflation, which strips out food and energy, flatlined,” said John Leiper, Chief Investment Officer at Titan Asset Management. “Price pressure, particularly in the services sector, will remain elevated for some time. Given the economy is holding up far better than predicted we expect the ECB to hike interest rates again on Thursday by a widely anticipated 50 basis points.”

Earlier in the session, Asian stocks rose ahead of the Federal Reserve’s interest-rate decision, as signs of cooling US inflation boosted risk appetite in the region. The MSCI Asia Pacific Index rose as much as 0.8%, driven by technology and consumer discretionary shares. Benchmarks in Hong Kong as well as the tech-heavy markets of South Korea and Taiwan all gained about 1%, while India declined. All eyes were on the Fed meeting later Wednesday, with markets expecting a 25-basis-point rate hike. Investors betting on a downshift in tightening were cheered by data showing slower growth in US employment costs, adding to signs of moderating inflation. 

“Wall Street is slowly growing confident that this week’s Fed rate hike might end up being the last one in this tightening cycle,” said Edward Moya, senior market analyst at Oanda. “The economy is weakening and that is fueling Fed rate cut bets at the end of the year.” India’s benchmarks erased early gains driven by a budget boost, as a selloff among Adani group’s stocks accelerated in afternoon trading.

In India, Adani Group stocks resumed their selloff after the share sale by the Indian conglomerate’s flagship firm failed to turn sentiment from Hindenburg Research’s fraud allegations. In one bright spot for the group, nearly all dollar bonds issued by Adani companies extended gains into a second day.

Japanese stocks closed mixed ahead of the Federal Reserve meeting later Wednesday and as investors weighed domestic company results. The Topix fell 0.2% to close at 1,972.23, while the Nikkei advanced 0.1% to 27,346.88. Lasertec contributed the most to the Topix decline, falling 14% after the chip-equipment maker reported quarterly profit that missed analyst estimates and trimmed its order outlook. Out of 2,164 stocks in the index, 935 rose and 1,134 fell, while 95 were unchanged. “There is a consensus that the FOMC may end interest-rate hikes in March,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “After that, we would want to see the impact on the economy”.

Australian stocks rose with the S&P/ASX 200 index 0.3% higher to close at 7,501.70, boosted by gains in mining stocks and banks, as investors await the Federal Reserve’s policy meeting.  Flight Centre was the top performer, surging 8% after the travel agency successfully completed a A$180 million placement to buy UK-based luxury travel brand Scott Dunn and provided a trading update.  In New Zealand, the S&P/NZX 50 index rose 1% to 12,090.93.

In FX, the Bloomberg Dollar Spot Index eased 0.1% ahead of the Fed policy decision later on Wednesday where it’s expected to raise rates by 25 basis points. The greenback was steady to weaker against its most Group-of-10 peers, with Scandinavian currencies topping the G-10 leaderboard. The Treasury curve bull flattened, with the 10-year yield dropping by about 4bps.

Treasury yields are slightly lower across the curve, with gilts outperforming over the early London session across the belly of the curve. US yields are richer by up to 2.5bp across the long end of the curve, which is outperforming slightly, flattening 2s10s, 5s30s spreads by 1.8bp and 0.5bp; 10-year yields around 3.485%, outperforming bunds by 3bp in the sector — the front end and belly of the UK curve is outperforming over the early London session. Fed-dated swaps market is pricing in around 27bp of rate hike premium for Wednesday’s decision and 47bp over the Feb. and March meetings; policy peak is priced at around 4.92% by the June meeting. The US session focus is on manufacturing data in the morning, before attention shifts to the Federal Reserve’s interest-rate decision at 2 p.m. in Washington and Chair Jerome Powell’s press conference 30 minutes later.    

In commodities, crude futures are little changed, with WTI trading near $79.00. Spot gold falls roughly 0.1% to trade near $1,926

Looking to the day ahead now, and the main highlight will be the Fed’s latest policy decision as well as Chair Powell’s press conference. Otherwise, data releases include the flash CPI release for the Euro Area in January, as well as the unemployment rate for December. Alongside that, there’s the global manufacturing PMIs for January and in the US we’ve got the ISM manufacturing print for January, the ADP’s report of private payrolls, and the JOLTS job openings for December. Finally, earnings releases today include Meta.

Market snapshot

Top overnight News from Bloomberg

The EU risks missing a March target to agree on a reform of its debt-limit rules in the face of resistance from countries including Germany, a prospect that may force member states into abrupt and potentially painful budgetary adjustments

For bond investors looking to bet big on a rally this year, signs of distress in the world’s highly-leveraged housing markets are only adding to their conviction. Places like the UK, New Zealand and Sweden — where house prices are slumping and mortgage payments are rocketing — are high on their watchlist

Shaky property markets across much of the world pose another risk to the global economy as higher interest rates erode household finances and threaten to exacerbate falling prices

Swathes of office staff have been forced to work from home Wednesday as widespread industrial action closes schools and cripples Britain’s rail network. As many as 475,000 union members are on strike

Chinese President Xi Jinping called for enhanced efforts to boost consumption in order to realize a virtuous economic cycle, as the world’s second largest economy gradually recovers from Covid Zero

A surge in Chinese spending last month has spurred more optimism about the country’s economic rebound, though weakness among manufacturers and sales of cars and homes still suggest the recovery isn’t yet on sure footing

Asia’s manufacturers are improving at the start of the year as the region becomes more optimistic about the boost from China’s reopening, while activity in the euro area shows the downturn is softening as cost pressures ease

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded higher after the positive lead from Wall St where stocks advanced into month-end and which was facilitated by the softer Employment Cost growth in the US, although gains were capped by the approaching FOMC rate decision and after disappointing Chinese Caixin Manufacturing PMI data. ASX 200 was led higher by strength in the mining and materials sectors after a rebound in commodity prices and with an upgrade in the Final Australian Manufacturing PMI also conducive for risk appetite. Nikkei 225 briefly climbed above 27,500 but closed off its highs amid a deluge of earnings releases and after Japan’s manufacturing activity was confirmed to have declined for a 3rd consecutive month. Hang Seng and Shanghai Comp. were positive albeit with momentum restricted after Chinese Caixin Manufacturing PMI missed forecasts and printed a 6th consecutive month in contraction territory which was in contrast to the recent rebound seen in China’s official PMIs.

Top Asian News

European bourses are little changed overall but with a modest positive bias, Euro Stoxx 50 +0.2%, ahead of data points and the FOMC. Sectors are predominantly in the green, but with the overall breadth narrow and no overarching theme in play despite numerous large cap earnings in the European morning; click here and here for details. Stateside, futures are a touch softer after yesterday's strength, ES -0.4%, with after-market updates weighing ahead of data and the Fed's policy announcement/press conference. Advanced Micro Devices, Inc. (AMD) - Q4 sales and profits topped expectations, but warns of revenue decline in Q1. +3.3% in pre-market trade  Tesla (TSLA) intends to increase the Shanghai plant's average weekly output to nearly 20k vehicles for Feb and March, according to an internal memo cited by Reuters.

Top European News

FX

Fixed Income

Commodities

Geopolitics

US Event Calendar

Central Banks

DB's Jim Reid concludes the overnight wrap

After a very positive January, the start of February today marks a pivotal three days for markets that have the potential to decisively set the tone for the weeks ahead. That begins this morning with the flash CPI release from the Euro Area for January, before we have the Fed’s latest policy decision and Chair Powell’s press conference tonight. Then tomorrow we’ve got more policy decisions from the ECB and the BoE, an array of major earnings including Apple, Amazon and Alphabet, followed up by the US jobs report for January on Friday.

The last time we had a big round of central bank meetings like this in December, the rate hikes themselves were much as expected, but the hawkish rhetoric alongside them led to a big selloff. Nevertheless, the mood going into this round is much more optimistic, with the S&P 500 (+1.46%) closing at a 2-month high after the US Employment Cost Index numbers showed labour costs grew by less-than-expected, whilst the French CPI release also came in much as expected (unlike the Spanish print the previous day). So all eyes are now on the Fed to see whether they maintain their hawkish tone of recent meetings, or whether there might be any signals of a potential pause at future meetings.

When it comes to the Fed’s decision today, a 25bps rate hike is now widely expected by both markets and economists, and anything other than that would be a massive shock. It would also mark the first “normal” sized hike since March 2022 when this hiking cycle began, before they embarked on a series of supersized hikes to swiftly get the policy rate into restrictive territory. Given that the 25bps move is anticipated, the main focus today will instead be on any changes to forward guidance, both in the statement and from Fed Chair Powell’s press conference.

In their preview (link here), our US economists write that the statement is likely to keep the reference to “ongoing” rate hikes. Their view is that although the FOMC might be inclined to adjust this language as it moves closer to a pause, doing so now has little upside and risks widening the existing gap between market expectations and a more hawkish Fed. In terms of market expectations, futures are currently pricing in one more 25bps hike after today’s move, but only a one-in-three of another move after that. Indeed, terminal rate pricing points to just +58.3bps of further hikes, so closer to 50bps than 75bps. Futures are also indicating that the Fed will start cutting by year-end, which is contrary to the last FOMC minutes in December, where it said that “no participants” thought it would be appropriate to start cutting rates in 2023.

Ahead of the decision, there was some good news from their perspective in the latest ECI numbers for Q4. That’s closely followed by the Fed and showed an increase in employment costs of +1.0% (vs. +1.1% expected), which is the slowest quarterly increase in a year and added to the signs that wage growth is moderating. Nevertheless, if you wanted a more negative perspective, it’s still running above levels consistent with their target, and is above what we saw throughout the entirety of the 2010s. So as with the inflation figures, the Fed still have a way to travel before they can be comfortable about reaching their target, even if we’ve come off the highs from early 2022.

This optimism on the inflation side got added support from the French CPI numbers yesterday, with the EU-harmonised print at +7.0% as expected. That was a bit higher than the +6.7% in December, but the good news from an investor perspective was that it didn’t exceed expectations, unlike the Spanish print on Monday. All eyes will now be on the release for the Euro Area as a whole at 10:00 London time, and particularly on core inflation which hit a record 5.2% in December.

With all that to look forward to, markets staged a decent rally yesterday and the S&P 500 was up +1.46% to recover from its slump on Monday. The moves were part of a broad-based advance, with all 24 industry groups gaining on the day, led by autos (+4.32%), transports (+3.19%), retail (+2.24%), and materials (+2.22%). The worst performing industries were more defensive sectors, but even they advanced on the day as well. Meanwhile, the small-cap stocks in the Russell 2000 (+2.45%) were a particular outperformer as they closed at a 5-month high. The performance in Europe was rather weaker, with the STOXX 600 down -0.26%, but they hadn’t experienced the late selloff after the previous day’s close either.

Sovereign bonds also rallied ahead of the various meetings, with yields on 10yr Treasuries seeing a decline of -3.0bps decline to 3.507%, with yields remaining fairly stable overnight. That was echoed in Europe as well, where there were slightly larger moves in yields for 10yr bunds (-3.2bps), OATs (-3.4bps) and BTPs (-4.4bps). Those moves followed a small decline in terminal rate pricing for the Fed down -1.3bps on the day, while expectations for the ECB were basically unchanged (-0.6bps).

Overnight in Asia, that positive mood has continued with the major indices recovering after the previous day’s losses. Currently, the KOSPI (+0.72%) is leading gains with the Shanghai Comp (+0.29%), Hang Seng (+0.27%), CSI 300 (+0.25%) and the Nikkei (+0.09%), posting smaller advances. That’s also in spite of overnight data showing that Chinese manufacturing activity shrank more than expected in January, with the Caixin manufacturing PMI at 49.2 (vs. 49.8 expected), even if that was up from the 49.0 reading in December. Outside of Asia, the picture is a bit less positive as well, with futures on the S&P 500 (-0.28%) and the NASDAQ 100 (-0.39%) in negative territory ahead of the Fed’s decision today.

Looking at yesterday’s other data, the Euro Area economy unexpectedly grew by +0.1% in Q4 (vs. -0.1% expected), so avoiding a recession for the time being. That said, plenty of countries still saw a quarterly contraction, including Germany (-0.2%), Italy (-0.1%), Sweden (-0.6%) and Austria (-0.7%). Otherwise, UK mortgage approvals fell more than expected to 35.6k in December (vs. 45.0k expected), which is their lowest level since May 2020 when the economy was affected by the Covid-19 pandemic.

To the day ahead now, and the main highlight will be the Fed’s latest policy decision as well as Chair Powell’s press conference. Otherwise, data releases include the flash CPI release for the Euro Area in January, as well as the unemployment rate for December. Alongside that, there’s the global manufacturing PMIs for January and in the US we’ve got the ISM manufacturing print for January, the ADP’s report of private payrolls, and the JOLTS job openings for December. Finally, earnings releases today include Meta.