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The R word -Breaking


© Reuters. FILE PHOTO. A trader operates on the New York Stock Exchange (NYSE), in Manhattan, New York City. May 18, 2022. REUTERS/Andrew Kelly/File photo

Sujata Rao gives a look at tomorrow’s markets

Minutes of the Fed’s most recent meeting showed that the central bank has not considered larger, 75-basis point rate increases. These, combined with softer economic dataprints are causing the money markets not to adjust their vision of when the Fed funds rates may peak.

The June 2023 eurodollar futures contract implied yield — an indicator of where the markets consider interest rates at this point — fell by 80 basis points. The implied September yield of 3% has dropped below the February level for the first-time since February.

Graphic: Eurodollar futures – c25766e8-21e8-43da-8bf4-65a87fc0db651

JPMorgan, NYSE:), also noted that April’s global inflation (ex–Turkey), slowed down to just 1.2% in April, compared with March’s record of 1.2%. Policymakers remain skeptical. South Korea raised its interest rates by quarter point on Thursday, following an aggressive New Zealand move the day before.

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Stock markets have been encouraged by a decline in U.S. Treasury yields, where 10-year borrowing costs are near their mid-April lowests. Futures point to Wall Street being more open and European markets growing.

The mood is still gloomy. Could recession be the cause?

According to the Institute of International Finance, this is a fact that will reduce global growth projections for 2022 by half to 2.3%. This amounts to basically a recession call once you account for the growth in population.

Oil and metal prices, which are usually reliable indicators of recession, have been distorted by shortfalls in supply — there are millions of barrels left of Russian oil on the market, and it is suffering significant deficits.

Futures remain firm at $115 per barrel despite global growth-crimping rate increases. This is causing workers, whether they are German metalworkers or UK railway employees or Silicon Valley staff to demand higher wages.

The following are key developments which should give direction to the markets on Thursday

Japan’s Corporate Service Prices Rise at the Fastest Rate in 2 Years

Economic data: Weekly jobless claims, U.S. core PCE index.

Turkey’s central banks to keep rates steady