The major European indices are closing mostly lower for the second consecutive day (Italy’s FTSE MIB is the exception). A snapshot of the provisional closes shows:
- German DAX, -0.3%
- France’s CAC -0.15%
- UK’s FTSE 100 -0.21%
- Spain’s Ibex, -0.9%
- Italy’s FTSE MIB +0.1%
- ECB hawks pushing for no APP purchases increase appear ready to compromise
- They fear doing nothing risks market turbulence
- ECB intends to bolster APP purchases next year once PEPP ends
- But there would be limits to size and time of commitment
- Open-ended increase in APP purchases is highly unlikely
- ECB to signal unusually high flexibility and optionality instead
It’s a given that PEPP purchases will not be extended beyond March next year. However, the debate in the ECB now is centering on what happens next. As mentioned back in September here, a boost to APP purchases is on the cards and that is what policymakers are leaning towards at the moment.
But considering the inflation conundrum, policymakers do not want to give any misguided impressions. Not only that, the hawks are certainly fighting for their own agenda too.
- Fed to be more hawkish in their language? Potentially line up quicker tapering/rate hikes?
- ECB to keep ‘transitory’ language? Any guidance on APP purchases for next year?
- BOE to hike rates this time around?
- SNB.. Meh
Omicron aside, there are plenty of things to digest just from that to pique interest in markets. I’ve shared some thoughts for stocks yesterday here and why Pfizer’s news may not be a straightforward play.
As the week slowly winds down, we’re moving past that checkpoint highlighted above so the next few sessions may be a more lacking in a sense when trying to figure out any firm direction. That is unless we get more virus headlines.
Morgan Stanley project a rate hike from the Federal Open Market Committee in September and December 2022
- followed up by another three hikes in 2023
- “We now expect the FOMC to begin raising interest rates in September next year, two quarters earlier than previously anticipated.”
Morgan Stanley and JPMorgan are looking for a lift off in September while Goldman Sachs are tipping June (also tipping June are Deutsche and BoAmerica analysts).
A US official tells Reuters that there will be discussion on possible military exercises that would prepare for a worst-case scenario to destroy Iran’s nuclear facilities should diplomacy fail. In order to prevent Iran from developing nuclear weapons.
Speculations such as this should provide a tailwind for oil, at the margin.
- The U.S.-Israeli preparations, which have not been previously reported, underscore Western concern about difficult nuclear talks with Iran
- Reuters with the polling, analysts shifting their Federal Reserve rate hike projections to Q3 2022 from Q4 in the survey for the previous month,
30 of the 36 economists asked say they now expect the Fed ‘lift-off’ rate hike to come earleir than they had previously projected.
- in Q3 2021 from Q4 previously thought.
Most thought there is a risk of even sooner than Q3.
The major indices closed higher for the third consecutive day.
- NASDAQ was the strongest of the three major indices
- Dow Jones recovered from earlier losses with buying into the close
- Russell 2000 of small-cap stocks was the biggest percentage gainer
- NASDAQ index 1.65% away from a record close
- S&P index only 3.3 points away from an all-time high close