A look at the day ahead in European and global markets from
Anshuman Daga:
Is it really good news? Probably yes, probably not.
Economies from the United States to Germany to Britain are
showing an unexpected pick-up in business activity, but markets
are again giving a thumbs-down to these indicators.
Just as inflation once again becomes the biggest pain point
for investors after they conveniently put away such worries last
month, strong growth cements the case for higher interest rates.
Fed funds futures traders are now pricing for the Fed's
benchmark overnight interest rate to reach 5.36% in July and end
the year at 5.18%.
And financial markets now point to a 95% chance of an
increase in the Bank of England's official rate next month, up
from 90% early on Tuesday.
That is depressing the mood for equity traders.
Asian stock markets floated in a sea of red on Wednesday
following an ugly sell-off on Wall Street.
Ten-year U.S. Treasury yields rose to 3.966%, the highest
since November. The dollar and sterling strengthened on
expectations of further rate hikes.
Inflation data from Germany and Italy due later on Wednesday
will offer clues on price pressures.
In this risk-off environment, the stage is set for the
release of the minutes of the Fed's meeting from last week.
Markets will scrutinise it for signs on how high officials
project interest rates will go following recent data that showed
stronger-than-expected U.S. employment and consumer prices.
Political tensions are also heating up as President Joe
Biden and Russian President Vladimir Putin spar verbally,
presenting starkly different views of the world and the Ukraine
war.
China said on Wednesday that its top diplomat, Wang Yi, met
Russia's security chief and both sides agreed that peace and
stability in the Asia-Pacific region should be resolutely
upheld, and opposed the introduction of a Cold War "mentality".
On the corporate front, Bloomberg News reported that
sovereign wealth fund Abu Dhabi Investment Authority is among
the parties considering a bid for a 34% stake in Associated
British Ports that could be valued at about 2 billion pounds or
more.
And finally, consulting giant McKinsey & Co, which is known
for advising businesses on a variety of projects including
layoffs, plans to cut about 2,000 jobs, in one of its biggest
round of layoffs, Bloomberg News reported.
Key developments that could influence markets on Wednesday:
European economic data: German and Italian Jan inflation,
Germany Feb Ifo survey
European results: Iberdrola, Lloyds, Telefonica
U.S. results: eBay, Nvidia
U.S. Fed releases minutes from Jan meeting
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(Reporting by Anshuman Daga; Editing by Sam Holmes)
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