A look at the day ahead in European and global markets from Kevin Buckland
The feel-good Fed rally is showing no signs of slowing down into the weekend: Asian stocks climbed to a four-month peak, setting Europe up for another strong session.
Things would need to go terribly wrong over the rest of the day to prevent the MSCI World index from notching a seventh straight winning week, its longest run in six years.
The bullish narrative global investors are running with is that the U.S. economy will achieve an improbable soft landing, giving the Fed room to pivot towards rate cuts earlier than many had thought.
Even the cautious postures of the ECB and BoE chiefs couldn’t dampen the mood.
But the parade of key central bank decisions that dominated this week still has further to run, with the Bank of Japan convening a two-day meeting from next Monday.
Speculation for an imminent end to negative rates may have come off the boil, but if December gets a bye, the next opportunity is only a month later, and markets seem to be bracing for Governor Kazuo Ueda to prepare the path at his press conference next Tuesday.
What it means for markets isn’t clear, but the BOJ’s position as a dovish outlier has provided an anchor for global bond yields throughout 2023.
As for the global stocks rally, it definitely has room for a pullback – even before the weekend.
The Dow reached a record high on Thursday, potentially tempting investors to take money off the table.
There are also worries that markets have already overshot: 150 bps of Fed rate cuts are priced for next year – twice as much as the Fed’s median forecasts indicate.
Other developments that could influence markets on Friday:
-France, Italy CPI (both Nov)
-France, Germany, UK, euro area PMIs (all Dec)
-US industrial production (Nov), NY Fed manufacturing (Dec), PMIs (Dec)
-BoE Deputy Governor Dave Ramsden speaks, as does Bank of Canada Governor Tiff Macklem
(By Kevin Buckland; Editing by Edmund Klamann)
