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Marketmind: Messi

Published 12/14/2022, 12:35 AM
Updated 12/14/2022, 01:00 AM
© Reuters. FILE PHOTO: Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a closed two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, U.S., November 2, 2022. REUTERS/Elizabeth Frantz/File P
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A look at the day ahead in European and global markets from Tom Westbrook

A vintage performance from skipper Lionel Messi took the World Cup semi away from Croatia and booked Argentina a place in the final.

In markets, it's now Federal Reserve Chair Jerome Powell who can take the game away from stocks that seem to be itching to rally into the end of a challenging year.

Wall Street traders did their best last night to jam the cork back in the champagne after an encouraging U.S. inflation print, pulling back larger gains to leave the S&P 500 up 0.7%, in the hope of postponing celebrations until after the Fed.

The cooling of price rises sets the scene for a step down in the pace of hikes, and a 50 basis point rise - after four consecutive 75 bp increases - is baked in.

That leaves the focus on Powell's remarks and on the "dot plot" projections for where interest rates are likely to head in the next few months.

Signs of divergence in the forecasts might unnerve investors if it makes them feel the Fed is becoming harder to predict, while Powell is also likely to try striking a tone that gives plenty of flexibility to be reactive into 2023.

Still, if he sticks to his November script, which did not contain much pushback against a weeks-long bond rally and its assumption that a peak in U.S. rates is nearing, the relief could be palpable.

Things were cautious in Asia, where MSCI's broadest gauge of regional stocks outside Japan rose 1%, as investors are also on the fence about chasing further gains in China's messy reopening.

The dollar loitered off its post-CPI lows, waiting for Powell.

US implied interest rates - 'SOFR' https://fingfx.thomsonreuters.com/gfx/mkt/lbpgggozjpq/sofr2023.png

© Reuters. Soccer Football - FIFA World Cup Qatar 2022 - Semi Final - Argentina v Croatia - Lusail Stadium, Lusail, Qatar - December 13, 2022 Argentina's Lionel Messi celebrates scoring their first goal REUTERS/Carl Recine

Key developments that could influence markets on Wednesday:

UK inflation, producer prices, Euro zone industrial output, Federal Reserve rate decision

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