During the European trading session on Thursday (March 7), global stock markets stopped near record highs. Europe is waiting for the European Central Bank to announce its latest interest rate cut plan on Thursday, after the Federal Reserve hinted that it will implement another interest rate cut for the first time in many years. The yen surged as confidence grew that the Bank of Japan would eventually start raising interest rates in March, the last of the major central banks to do so.
European and American stock markets performed modestly, with European stocks flat and the Nasdaq 100 index rising 0.3%. Federal Reserve Chairman Jerome Powell told lawmakers yesterday that although he is in no rush to start cutting interest rates, he will still start easing policy this year.
Among European stocks, Virgin Money UK rose after National Mortgage Association agreed to buy the bank for 2.9 billion pounds ($3.7 billion). Shares of Novo Nordisk jumped to a record high after the company released data on its weight loss drug amycretin.
Why did the Japanese yen rise violently?
The Japanese yen made headlines, rising as much as 1% against the dollar as wages accelerated. Data on Thursday showed that Japanese workers' nominal wages rose 2% in January. Japan's main employment union also won a big raise in wage negotiations for 2024, while Bank of Japan board member Junko Nakagawa said she was convinced conditions were forming to phase out negative interest rates.
Japan’s zero interest rate will be raised for the first time since 2007. Tokyo's Nikkei 225 index fell more than 1%, and two-year government bond yields climbed to their highest level since 2011.
Economists predict that a rate hike could come as soon as this month, with the yen rising to 147.90 against the dollar and 161.22 against the euro, both of which are their highest levels in at least three weeks. These moves have sparked concerns that rising domestic interest rates will attract the return of Japanese funds currently parked in overseas markets. The dollar fell 0.2% against a basket of currencies, marking its fifth straight session of losses.
Michael Metcalfe, head of global macro strategy at State Street Global Markets, said: "Japan's demand for foreign assets, especially U.S. Treasuries, has remained stable, but this cannot be taken for granted once JGB yields reach potentially more attractive levels. Of course."
European Central Bank decision coming
Investors are also hoping to glean signals from the European Central Bank on when it might start cutting interest rates. The European Central Bank is expected to keep interest rates unchanged at 4% on Thursday, with investors now expecting interest rate changes to be below 100 basis points, lowering their previous expectations. The focus will be on any information it provides on possible rate cuts in the coming months.
Amundi's Eurozone bond fund manager Isabelle Vic-Philippe said the market is currently "close to fair value" and predicts that the European Central Bank will cut interest rates 3-4 times starting in June this year. Still, one question she and many investors have is whether the European Central Bank or the Federal Reserve will act first.
Vic-Philippe said: "I think the European Central Bank may be the first to cut interest rates, if they are convinced that the Fed will also cut interest rates shortly afterwards, my question (to ECB President Christine Lagarde) is where do you think the neutral interest rate of the European Central Bank is currently? Location."
The European Central Bank will also release new macroeconomic forecasts and is expected to lower its inflation and growth forecasts for this year.
Futures prices are almost fully priced in expectations that the European Central Bank will cut interest rates for the first time in June, with a total of 88 basis points expected for the entire year.
Powell continues to make appearances today
In addition, Powell will continue to testify before Congress this trading day, and the latest weekly employment benefit data will lay the foundation for Friday's monthly non-farm payrolls data.
Wall Street closed higher on Wednesday after Federal Reserve Chairman Jerome Powell, true to form, said the central bank still expects to cut interest rates later this year despite "uncertainty" whether inflation will continue to make progress. This keeps the probability of a U.S. interest rate cut in June at 84%. Longer-term bond yields fell on Wednesday, the dollar fell, gold hit a record high and oil prices soared.
James Knightley, chief international economist at ING Group, said: "There is nothing particularly surprising in Fed Chairman Powell's monetary policy testimony prepared to Congress. More data is needed, but there is more evidence that the job market is cooling. , we still think they can start cutting rates from June."
In fact, data showed that U.S. private employment increased slightly less than expected in February, but the report is not strongly correlated with the official non-farm payrolls report scheduled to be released on Friday.
State Street Bank Metcalfe pointed out that the market has reacted calmly to the reduction of expectations for Fed rate cuts in 2024, with only three rate cuts currently expected - in line with the Fed's own forecasts. But traders are now unsure whether the Fed will guide fewer rate cuts. The market may be in some degree of wait-and-see mode because the market has reached a point where it has moved in lockstep with the Fed and the market has put the ball back in the Fed's court. "
Gold prices continued their rapid rise, climbing to a high of $2,161.48 an ounce.
Oil prices remained stable, with US WTI crude oil prices rising 1.3% yesterday. The death of a commercial crew member was confirmed for the first time on Wednesday as tensions rose in the Middle East, including after Houthi rebels began launching attacks in the region.
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Indonesia
2024-03-08
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