HomeBusinessPowell, data and the Taiwan earthquake keep markets tense

Powell, data and the Taiwan earthquake keep markets tense

(Reuters) – A look at the day ahead in U.S. and global markets by Samuel Indyk

The shaky start for markets in the second quarter could worsen on Wednesday. Federal Reserve Chairman Jerome Powell will give a speech, and markets are doubtful whether the central bank will continue easing policies as early as June.

Money market traders disagree with the Fed – and most analysts – on the timing of the first rate cut and the extent of the easing this year.

Markets are still not fully pricing in a cut until July, although they expect a roughly 65% ​​chance of a cut in June. Meanwhile, they have also lowered their expectations for three cuts in 2024, but with inflation stable and economic data strong, the Fed itself could slowly come around to that view.

“I think the bigger risk would be to cut rates too early,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Tuesday, although she wouldn’t rule out a rate cut in June if coming inflation numbers meet her expectations. predictions for a further interest rate cut. reject.

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Referring to Friday’s personal consumption expenditure data, Powell said inflation is “in line with what we would like to see.”

His comments on Wednesday will be examined for more clues about whether the June confab is the right time to relax the policy.

The debate over the timing of the first rate cut has kept Treasury yields high, threatening the stock market rally that has made U.S. stocks increasingly expensive while hitting record highs.

On Tuesday, 10-year Treasury yields hit a four-month high, while the S&P 500 fell nearly 1% to start the quarter.

Investors will also be watching for the impact on supply chains after the strongest earthquake in 25 years hit Taiwan, disrupting the semiconductor sector in particular.

“We believe this could lead to supply disruptions across the tech supply chain,” Barclays analysts said in a note.

Taiwan Semiconductor, a major supplier to Apple and Nvidia, initially evacuated some factories but later added that employees were returning to work. Shares fell 1.3% in Taipei.

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Elsewhere, Wednesday’s figures include ADP’s private sector payrolls report, a precursor to Friday’s official nonfarm payrolls readout, and the ISM services index for March.

Back to Wall Street and stock index futures are again indicating a cautious start, with S&P and Nasdaq futures showing a slight decline.

The dollar remains high, with the yen near 152, close to its weakest level in decades, keeping traders on alert for intervention from Japanese officials.

Key developments that should give more direction to US markets later on Wednesday:

* The Fed’s Powell, Bowman, Goolsbee, Barr and Kugler will speak

* ADP private non-agricultural employment, ISM non-manufacturing

* The US Treasury Department will auction four-month notes

(Reporting by Samuel Indyk; Editing by Bernadette Baum)

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