Morning Bid: Markets ‘Fed Up’

Traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, US, Sept. 13, 2022. REUTERS/Andrew Kelly

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A Day ahead of Anshuman Daga’s European and Global Markets

No pain no gain.

Read:Hysteria as Goldman Sachs might lay off 2% of staff

That seems to be the message from the Fed, as it provided sobering forecasts and laid the groundwork for a faster rise in key rates to higher than expected levels. read more

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That caused Asian equities to crumble to two-year lows, the dollar to a new high in two decades and government bond yields higher.

BlackRock, the world’s largest asset manager, expects the Fed to raise rates several more times, with data determining the “truth” of those and how long they will have to go.

Rick Rieder, who heads BlackRock’s global investment allocation team, says that as a result of slower economic growth, the question now is when the economy will go “Fed Up”, with interest rates rising and liquidity tightening, and the demand will adjust to these much tighter monetary conditions.

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Meanwhile, as sterling hit a new 37-year low of $1.1225, the only hope for any remaining sterling bulls could be a massive surge by the Bank of England.

While economists surveyed by Reuters last week expect the central bank to announce at 1200 GMT that interest rates will rise from 1.75% to 2.25%, financial markets have priced in a larger step to 2.5%. read more

It is true that inflation has only just reached a 40-year high, but Britain is still dealing with free government spending, slower growth and a tight labor market.

Elsewhere, the Bank of Norway is also widely expected to raise interest rates by 50 basis points to 2.25% today, the highest level since 2011. read more

But the Swiss National Bank is expected to join the club for 75 basis point rate hikes to stifle inflation that has been on for nearly three decades. read more

In Asia, the focus was on the Bank of Japan, which maintained its ultra-accommodative monetary policy and moderate policy guidelines, and remained an outlier amid a wave of central banks raising interest rates to curb rising inflation. read more

Read:Britain’s banks told to tackle wealth inequality despite one-off payments
Reuters Graphics

Key developments that could affect the markets on Thursday:

Central Bank Meetings: Swiss National Bank, Norwegian Central Bank, Bank of England

Economic Data: Weekly U.S. Jobless Claims

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Reporting by Anshuman Daga

Our Standards: The Thomson Reuters Trust Principles.

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