The rally of the last few days may reach a turning point today. Markets expect to see a Fed with at least a more moderate tone due to business confidence indicators marking economic contraction and a generalized fall in commodity prices – copper marked yesterday its seventh month in negative territory, something that had not happened since 1997, and accumulated a 30% fall from highs – that give reason to believe that inflationary pressures will ease, especially with respect to goods. However, yesterday also saw the release of US unfilled job openings data, which rose again in September after August’s steep drop – see macroeconomics – continuing to point to a tight labor market and no relief in terms of wage costs.
Markets, expecting a 75bp hike at this meeting – taking rates to the 3.75% – 4% range, will focus more attention on possible clues about the move at the December meeting and any signs of moderation in the speech. For our part, we think it is too early to talk about a turn in monetary policy, with inflation still not under control and the labor market still showing no clear signs of weakness.
Red numbers on Wall Street (S&P -0.4%; Nasdaq -0.8%), awaiting today’s Fed rate decision. The session went from better to worse, turning around after good macro data on employment and closing almost at the lows of the day. The October close, from the previous Monday, was 8% for the S&P and +3.9% for the Nasdaq, although the Dow Jones was up +14%, its best month since 1976. By sectors, we highlight yesterday’s energy purchases (+1%) and Abiomed’s jump (+50%), after the announcement of Johnson & Johnson’s takeover bid (see news). S&P futures today point to moderate gains at the open of 0.2%.
Rises again in Europe (EuroStoxx 50 +0.9%; Ibex +0.5%), awaiting today’s Fed rate decision, which is expected to bring the fourth 75 b.p. increase in the official price of money in the United States. In the previous session, the Ibex closed with gains of 8% in October, which was its best month in two years, with companies such as IAG, Repsol and BBVA leading the gains. By sectors, basic resources (+3.4%) and real estate (+2.2%) led the rises compared to the media (-0.9%) and healthcare (-0.3%) sectors. Stock markets open this morning in green in Europe.
Asian stock markets are mixed, with strong gains in China. Hong Kong’s Hang Seng closed with gains of 2.4%, which, together with the gains seen in the previous session, represents the best performance of two consecutive sessions for the index since March. In a day shortened by a severe storm warning, Chinese markets are speculating on the release next Friday of measures to improve the strict Covid-zero policy currently in place. The mainland CSI 300 index is also up but less, +1.3%.
Little change for the Japanese stock market (Nikkei -0.06%; Topix +0.1%), awaiting the Fed’s rate decision due today. The results season in the country is going better than expected and allows rises in companies such as Sony (+7%), after announcing that it has improved its annual sales and profit forecast
Tense calm in bonds. Yesterday, the fixed income market remained largely unchanged ahead of the Fed meeting. The US 10-year benchmark, which was easing slightly, was shaken by unfilled vacancy data that returned the yield demanded on the US 10-year bond to levels above 4%. In Europe, peripheral premia widened slightly although they remain at levels below pre-ECB meeting levels.
In the currency market, yesterday’s session closed with very slight upward changes for the dollar, which appreciated +0.05% at the close of the day. This morning also opens with no relevant news, with the dollar losing -0.03%, so that the cross is at 0.9884 EUR/USD. Regarding the pound, yesterday it recorded a session with gains of +0.23% against the euro. This morning it appreciated by a slight +0.07%, which places the cross at 0.8594 EUR/GBP.