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The Powell Put

THE POWELL PUT (0752 GMT)

Wall Street must be hoping Federal Reserve Chair Jerome Powell would speak in public every day. Given a chance to react hawkishly to the bumper January payrolls report, Powell demurred and chose to stay boringly balanced on the rate outlook.

Asked if he regretted using "disinflation" 11 times in his media conference last week, he said no, he would do the same again.

He reiterated the "disinflationary process" was under way, but it would likely take a "significant" period of time and if the data kept coming in stronger than expected, the Fed would have to do more on rates.

Hardly earth shattering stuff, but for markets these days if Powell is not all-out in-your-face hawkish, then he's dovish. There's no middle ground. Wall Street duly rallied while Treasury yields and the dollar have eased a little, with futures priced for just two more hikes to 5.0-5.25%.

US terminal rate
Thomson ReutersUS terminal rate

Meanwhile, the yen has had a good 24 hours which some put down to yesterday's report of strong wages figures, a sea-change for a market that has spent years ignoring Japanese data because nothing ever happened in them.

Nominal total cash earnings grew 4.8% y/y last quarter, the fastest since January 1997, thanks to an outsized 7.6% jump in December bonuses.

yields vs stocks
Thomson Reutersyields vs stocks

Faster pay growth in the spring labour talks is seen as an essential condition for the Bank of Japan (BOJ) to scale back its massive monetary stimulus.

Calls by Prime Minister Fumio Kishida for companies to raise wages seem to actually have had some effect with some big names pledging large rises recently.

Reuters Graphics
Thomson ReutersThe Great Rate Race

On Tuesday, video game maker Nintendo Co Ltd 7974 said it plans to lift workers' base pay by 10% even as it cut its profit outlook. It was rewarded today by the market knocking its shares down 8%.

Key developments that could influence markets on Wednesday:

- Fed's Williams, Cook, Bostic, Barr, Kashkari and Waller all speak, with Waller and Williams likely to carry the most weight with markets

- Earnings from Uber and Walt Disney, which will be the first result with Iger back in charge

(Wayne Cole)

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EUROPE EYES SOLID START AS OIL PROFITS CONTINUE TO ROLL IN (0740 GMT)

European stocks are set for a solid start with March futures contracts FESX1! up 0.8%, wiping out Tuesday's losses and then some.

Some blockbuster earnings are rolling in from France. Oil major TotalEnergies TTE posted a record adjusted net profit continuing a spate of positive earnings for the sector, which also includes the latest from Norway's Equinor 002NG.

Meanwhile France's third biggest bank Societe Generale GLE posted higher-than-expected profit in the fourth quarter, and another bank - Italian state-owned Monte dei Paschi di Siena BMPS - has also outdone expectations with its larger-than-expected quarterly profit.

In a speech on Tuesday, Fed chair Jerome Powell, while acknowledging that interest rates may need to move higher, still struck a less hawkish tone than had been feared which sent stocks higher on Wall Street overnight and on Wednesday in Asia and weighed on the dollar.

A warning signal came from the UK's largest housebuilder Barratt Developments Plc BDEV, after it flagged persisting market uncertainty as high mortgage rates weigh on demand and a sharp fall in house prices dent margins.

(Lucy Raitano)

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