© Reuters
Investing.com – European exchanges traded lower on Wednesday, preparing for a speech by Jerome Powell, head of the US Federal Reserve, scheduled for today.
“Stock markets are under pressure from a variety of factors, ranging from uncertainty over Fed monetary policy to fluctuations in oil prices, creating cautious sentiment among investors amid the current global economic environment,” said Sergio Avila, senior market analyst at IG. .
Adam Darling, investment manager in Jupiter AM’s fixed income group, agrees:
“Many investors seem to believe that the authorities can orchestrate a soft landing for the US economy, allowing inflation to fall to desired levels without losing momentum on economic growth. Personally, I think this may be wrong as there are many signs that growth is slowing around the world,” he said.
Darling believes the global economy may be on the brink of recession. The stress caused by high interest rates is already evident in a number of sectors. Corporate bankruptcies are skyrocketing, and many issuers in the high-yield bond market cannot survive at current yield levels.
As Link Securities explained, investors are still betting that the Federal Reserve has already completed the process of raising rates, and moreover, they are beginning to discount that it will begin to reduce rates in May-June next year; in fact, the futures market is discounting 4 rate cuts in 2024 compared to the 2 that FOMC members plotted on their scatter plot.
In this regard, analysts recall that yesterday several members of this committee tried to cool the spirit of investors with various statements, among which one can highlight, due to its great credibility, the statement of the head of the Minneapolis Federal Reserve Bank Neil Kashkari that victory in the fight against inflation cannot yet be declared, and that for The Fed is better off being wrong and doing more rather than defaulting to its contractionary monetary policy.
“We understand that such statements will be repeated in the future, since the last thing the Fed now wants is a weakening of financial conditions with falling bond yields, at least until it feels that it has managed to tame inflation,” they concluded. conclusion.
In an interview with Bloomberg on Tuesday, Kashkari said that the Fed is not discussing the issue of cutting rates:
“This kind of intense economic activity makes me wonder if we’ve done enough,” he said.
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2023-11-08 11:22:00
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