Fed fireworks set nervy stage for BoE

A look at the day ahead in European and global markets from Kevin Buckland

If the market vacillations that followed the Federal Reserve are anything to go by, European investors should buckle up ahead of policy decisions from no less than four of the region’s biggest central banks today – with the Bank of England providing the crescendo.

Considering investors largely expected a hawkish pause from U.S. policymakers, the resulting surge in Treasury yields and slide in stocks (.SPX) show that Chair Jay Powell showed a little more talon than they were comfortable with.

Advertisement · Scroll to continueReport this ad

U.S. yields pushed even higher in the Asian time zone, while U.S. stock futures pointed lower. Asian shares slumped region-wide (.MIAP00000PUS) – including a 1% slide for Japan’s Nikkei – while crude oil extended its retreat from a 10-month peak.

European equities (.STOXX) have scope to fall at the open, following their bounce in the previous session. How much a hawkish Fed can spoil the good feeling from yesterday’s surprise fall in British inflation will ultimately come down to what the BoE makes of the conflicting forces at play, in a finely balanced call on whether to hike or skip.

Advertisement · Scroll to continueReport this ad

But the BoE is actually the last of the European central banks to set policy on Thursday, with the SNB and Riksbank kicking things off, followed shortly by Norges Bank.

This week’s central bank bonanza doesn’t end in Europe either. The Bank of Japan’s policy decision on Friday will be one of the most scrutinised in a string of closely watched recent meetings, after Governor Kazuo Ueda made a startling hawkish shift in a Yomiuri newspaper interview this month, suggesting negative interest rates could be gone by year-end.

But the BoE is actually the last of the European central banks to set policy on Thursday, with the SNB and Riksbank kicking things off, followed shortly by Norges Bank.This week’s central bank bonanza doesn’t end in Europe either. The Bank of Japan’s policy decision on Friday will be one of the most scrutinised in a string of closely watched recent meetings, after Governor Kazuo Ueda made a startling hawkish shift in a Yomiuri newspaper interview this month, suggesting negative interest rates could be gone by year-end.

Source: Reuters