Dhara Ranasinghe gives us a preview of the day ahead.
Previous market routs on anticipated policy tightening made central bankers think twice about withdrawing large amounts of monetary support. Things are different now for the Federal Reserve, which will end a two-day meeting later on Wednesday.
With inflation at 40-year highs, the Fed is unlikely to change its mind about raising rates, and will almost certainly announce a rate hike in March later on Wednesday.
However, the S&P 500's nearly 9% drop this month and the flattening of the US yield curve are not encouraging signs of attitude toward the economy and may temper the case for the Fed to take a more aggressive position.
The Fed's Jerome Powell must walk a narrow line between taking steps to restrain inflation while also not tightening policy too quickly, as this would hasten the recovery. His every move will be scrutinized by the markets.
Meanwhile, when the Bank of Canada meets later today, the odds are split on whether it will raise rates for the first time since 2018. When choosing whether to begin a tightening campaign aimed at curbing red-hot inflation, the bank may need to consider Omicron's anger.
Asian stock markets have stabilized following three sessions of losses, with central banks in the limelight. Stock futures in the United States and Europe were higher.
As Western leaders stepped up military preparations and made plans to shield Europe from a potential energy supply shock, geopolitical tensions were likely to remain in focus after US President Joe Biden said he would consider personal sanctions against Russian President Vladimir Putin if Russia invaded Ukraine.
Markets should have more direction on Wednesday as a result of the following key developments:
- Microsoft (NASDAQ:MSFT) raises its stock after releasing a positive prediction.
The Federal Reserve is holding a meeting.
- China Evergrande, which is heavily in debt, will have an investor call on Wednesday, according to sources.
- The Federal Reserve will announce its policy decision at 1900 GMT.
- Meeting of the Bank of Canada
- Goods trade balance, inventories, and new home sales in the United States
- European earnings: Essity, Sage Group (LON:SGE), Barry Callebaut Federal Reserve, European Central Bank, and Bank of Japan rates.Source
