Even the mood in gloomy Britain brightened. While an easing of Europe's energy shock during the mild winter has been a significant regional factor, the boost to confidence tallies with booming U.S. labour markets and retail sales for January and the re-emergence of China from its COVID lockdowns. The debate is no longer about whether there's a hard or soft landing for the world economy this year, it's whether there is any landing at all. The problem for markets is that dodging a recession and re-acceleration of global growth also makes it more difficult to get sticky inflation rates back to central bank targets and pushes any hope of interest rate easing this year off the agenda. Futures markets are now pricing in a peak Fed rate at just over 5.3% in July, about 65 basis points higher than current rates. Yearend rates are priced as high as 5.11%. Two-year U.S. Treasury yields hovered just below Friday's peaks at 4.68% ahead of Tuesday's auction of new paper. With inflation and rates worries to the fore, equity markets see the glass half empty - mixed to lower in Europe and Asia on Tuesday, with U.S. stock futures in the red ahead of the open. The dollar was marginally higher, mostly against the euro and yen. The Japanese currency was dampened by less ebullient Japanese manufacturing sentiment. Sterling was the big gainer on the surprise jump in UK services.
Aside from Tuesday's business surveys, a reality check for U.S. retailers is due from Walmart and Home Depot's quarterly earnings - holding last month's red-hot retail numbers up to the light.
In banking, HSBC rose 1.5% - bouncing back from
early losses after announcing a surge in its quarterly profit.
Even though HSBC dampened investors' expectations of a
sustained income bonanza from rising global interest rates,
Europe's biggest bank reported a 92% surge in quarterly profit
and pledging more regular dividends and share buybacks.
Key developments that may provide direction to U.S. markets
later on Tuesday:
* U.S. and global flash business surveys for Feb. Philadelphia
Fed's Feb non-manufacturing activity, Jan existing home sales,
Canada Jan inflation and retail sales
* U.S. Treasury sells 2-year notes
* U.S. corp earnings: Walmart, Home Depot, Molson Coors, Caesars
Entertainment, Medtronic.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ US implied terminal rate Home Depot same store sales European Gas Storage British bank shares ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (By Mike Dolan, editing by XXXX mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD, Editing by Louise Heavens)
Messaging: mike.dolan.reuters.com@thomsonreuters.net))