That's hardly boom time, but it's not the deep recession many fear. And it's certainly not what the deepest yield curve inversion in more than 40 years between 3-month paper and 10-year notes suggests to many investors.
But if you consider rising speculative short positions in S&P 500 futures, where weekly CFTC data show net shorts held by speculators have almost doubled in the month to April 4, then it appears that many hedge funds are already braced for stock reversal and the burden of proof on a recession may be rising. What's more, cash holdings in money market funds have soared by more than $350 billion since before the banking blowup last month even though fears of systemic contagion have subsided. While much of that money may stay there for near-5% interest rate returns, some may rebalance back into wider markets. And so investors return to scrutinising the Fed to see if the central bank forces the recession by tightening ever further. Today's CPI report is expected to show headline inflation falling as low as 5.2% in March from 6% previously - showing the disinflation journey over half way back from 40-year highs of 9.2% last June to the Fed's 2% target, Core rates excluding energy and food are the bother, however, and are expected to have ticked higher to 5.6% - above the headline rate. With Fed policy meeting minutes due later in the day, the runes of what must have been a tense gathering of officials in the middle of the regional banking shock will be eyed closely. Overnight Fed speeches sent some mixed signals again. Minneapolis Fed President Neel Kashkari reckoned recession was still a risk but inflation wouldn't get back close to the 2% target until next year. Philadelphia Fed chief Patrick Harker touted one last hike and then "sitting there for a while."
Chicago Fed boss Austan Goolsbee was more in wait-and-see
mode.
Ahead of the CPI number, futures markets now see a 75%
chance of one last quarter-point rate hike to the 5.0-5.25%
range in May. Two-year Treasury yields clung on to 4% and the
dollar was steady.
With bourses around the world modestly higher on Wednesday,
Wall St futures were also a shade higher. The VIX volatility
gauge was subdued just above 19.
Hong Kong stocks underperformed overnight - with
geopolitical tensions high surrounding Taiwan and Chinese
military operations around the island.
As the IMF and World Bank's Spring meetings get underway,
G7 finance ministers and central bankers gather on the sidelines
on Wednesday - chaired by Japan.
Key developments that may provide direction to U.S. markets
later on Wednesday:
* U.S. March consumer price inflation report, Cleveland Fed
March CPI, U.S. March Federal budget balance
* Bank of Canada policy decision
* G7 finance ministers and central bank chiefs meet on sidelines
of Spring IMF/World Bank meeting in Washington
* U.S. Federal Reserve releases latest policy meeting minutes;
San Francisco Fed President Mary Daly, Richmond Fed chief Thomas
Barkin speak; European Central Bank President Christine Lagarde,
ECB vice-president Luis de Guindos, ECB board member Fabio
Panetta and Bank of Spain governor Pablo Hernández de Cos all
speak; Bank of England Governor Andrew Bailey speaks
* U.S. Treasury auctions 10-year notes
* U.S. President Joe Biden in Ireland
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Sticky prices vex central banks Jobs market unbowed Ether upgrades Carmax earnings ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(By Mike Dolan; Editing by Toby Chopra
mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
