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Whack-a-mole on markets -Breaking

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© Reuters. Traders are seen on the New York Stock Exchange’s trading floor in Manhattan, New York City. May 19, 2022. REUTERS/Andrew Kelly

Saikat Chatterjee gives a look at what’s ahead for the markets.

Investors obsess about what the biggest central bank of the world might do next. However, global markets are experiencing a heightened sense of unease.

First, Russia is closer to default since the United States refused to extend a waiver that allowed Moscow to make payments to U.S. bondholders.

Second, North Korea may have fired an intercontinental-ballistic missile shortly after U.S. president Joe Biden returned from his Asia trip.

In Britain, Sue Gray, a senior civil servant, may publish a report on lockdown-breaking activities in Downing Street later in the day. This will put more pressure on Boris Johnson who faces a steep slowdown in UK’s economy.

These developments are being ignored by the markets at present. Asian stocks rose, while European and U.S. stock futures were in the green. This was mainly due to a decrease in U.S. Treasury Yields. Ten-year borrowing costs have been at the low end of their history for nearly one month.

This is due to the lackluster PMI and housing data, which point to a cooling economic environment.

After a 50-basis-point expected interest rate increase and a more hawkish tone by the central banks, New Zealand dollars was the top currency trader.

US dollar is at one-month highs. This was due to weak dataprints that forced traders not to place as much bets about monetary tightening. The rate of interest hikes in the money markets for the three next meetings are now at 131 bps, compared to 145 bps the beginning of the week.

Raphael Bostic from Atlanta Fed warned of the dangers of rate hikes that could cause “significant economic distress”. The markets will be watching for the minutes of Wednesday’s Fed meeting.

On Wednesday, key developments should give more direction to the markets:

-Speakers Corner: ECB President Lagarde and Rehn. Panetta. Holzmann. Lane. BoJ Governor Kuroda. Fed Vice Chair Brainard. BoE policymaker Tenreyro.

Data: April U.S. data on durable goods orders, and core capital goods orders.

TotalEnergies agrees to buy 50% of U.S. renewables company Clearway 28efae8e-ea78-4ce2-b0af-d343e991d79c1

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