(Corrects story published Jan. 27 to show in paragraph 4 that the gap between three- and six-month yields is at steepest since 2018, not 2015)
A look at the day ahead from Sujata Rao.
The world’s largest economy is predicted to https://www.reuters.com/world/us/us-economy-likely-regained-steam-q4-2021-growth-seen-best-37-years-2022-01-27record GDP growth at a 37-year high of 5.5%, with data due later on Thursday. Some such as JPMorgan reckon the figure could be as high as 7.5%. We will also likely see weekly jobless benefits claims dropping further.
That, in a nutshell, is why the U.S. Federal Reserve https://www.reuters.com/business/finance/inflation-fighting-fed-likely-flag-march-interest-rate-hike-2022-01-26 feels there is “quite a bit of room to raise interest rates”.
Could there be more than four rate rises this year? Powell did not deny that possibility, so markets have started to price a fifth move.
Accordingly, Treasury two-year borrowing costs hit 23-month highs, shrinking the gap with 10-year yields. And on t-bills, the shortest-dated debt segment, Tradeweb notes a sharp steepening, with the gap between the three- and six-month yields at the steepest since 2018, and more than double from a month-ago period.
Similar steepening is notable between other bill maturities in a sign more tightening is being priced.
So the stock market selloff that had abated pre-Fed is back in full swing, with world stocks down 0.6%; European and Wall Street looking set for another tumble.
But if buyers are running scared, there are bargain hunters of a different sort — billionaire William Ackman https://www.msn.com/en-ca/money/other/ackmans-pershing-square-takes-new-position-in-netflix/ar-AATbfQq said he had snapped up $1 billion worth of Netflix shares since last Thursday’s market tumble.
Companies, meanwhile, continue to deliver good news; Tesla https://www.reuters.com/business/autos-transportation/tesla-beats-revenue-estimates-record-deliveries-2022-01-26 for instance predicted 50%-plus growth this year, while Deutsche Bank https://www.reuters.com/business/finance/deutsche-bank-nearly-triples-q4-profit-defying-expected-loss-2022-01-27 posted its biggest profit since 2011. But with buyers still in hiding, Tesla shares tanked in after-hours trade.
Key developments that should provide more direction to markets on Thursday:
-China’s industrial firms saw December profits grow at slowest pace in 1-1/2 years
-German consumer morale improves slightly
-New Zealand inflation at three-decade high
-South Africa expected to raise rates by 25 bps
-U.S. durable goods/advance Q4 GDP reading/initial jobless claims
-U.S. 7-year note auction
-U.S earnings: Blackstone, Dow chemicals, Southwest airlines, McDonalds T Rowe Price, Mastercard, JetBlue, Apple, Visa, Mondelez,
-European earnings: LVMH Moet Hennessy Louis Vuitton, Dr Martens, UniCredit Britvic, St. James’s Place STMicroelectronics, SAP, Deutsche Bank, IG Group, Diageo, Sabadell, SEB, Polymetal
(Reporting by Sujata Rao; editing by Saikat Chatterjee)