Markets wary Powell may undermine rate-cut bets

A look at the day ahead in European and global markets.

View in Browser Sign up for Reuters newsletters Morning Bid Europe A look at the day ahead in European and global markets By Ankur Banerjee, Asia Finance & Markets, Breaking News Correspondent Data refreshes every time you open this email. For more European market news, click here. Please send any feedback to morningbid@thomsonreuters.com. With a blockbuster November in the rear view mirror, investors are gearing up for a bright start to December in Europe, full of expectations that central banks will soon start cutting rates, although a "fireside chat" with Fed Chair Jerome Powell later in the day could spoil the party.   A calendar full of manufacturing PMIs from countries across Europe will provide a clearer picture of the region's economy, but in the meantime futures indicate a higher open for European bourses. Today's Market News OPEC+ agrees to deepen voluntary oil output cuts ECB's Nagel: inflation trends encouraging but rate cut talk too early Market pushback on central banks' rates view just got louder Federal Reserve Chair Jerome Powell answers a question during a press conference at the Federal Reserve in Washington, U.S., November 1, 2023. REUTERS/Kevin Lamarque/File Photo Rate cut expectations Data on Thursday from both the euro zone and the U.S. showed inflation was easing, spurring expectations of rate cuts by central banks, with money markets pricing in more than 100 basis points in rate cuts next year from both the Fed and the ECB.   The disconnect between financial markets and central banks has only deepened as central banks push back against talk of rate cuts while markets take in the relatively more benign inflation data of recent weeks.   Fed policymaker Christopher Waller, an influential and hawkish Fed voice, shook things up a bit this week, however, saying he was increasingly confident inflation would return to its 2% target. That helped to embolden markets to take on rate-cut bets.   Markets are now pricing in a 46% chance of the central bank cutting rates in March, the CME FedWatch tool showed. A week earlier it was priced at 27%. Graphics are produced by Reuters. Spotlight on Powell With that backdrop, the spotlight will shine brightly on Powell when he takes the stage later on Friday. Whether Powell chooses to stay away from policy comments or talk about rates remains to be seen. Whatever he says, or not, will sway the markets.   Over in Asia, the last month of the year got off to a tentative start, with shares lower, the dollar on the defensive and oil prices extending their recent decline.   In company-related news, Tesla's long-delayed Cybertruck is here. The vehicle, made of shiny stainless steel and shaped into flat planes, will be priced from $60,990, more than 50% above what CEO Elon Musk had touted in 2019. Key developments that could influence markets on Friday: Economic events: UK nationwide house prices for November, Manufacturing PMI data from France, UK, Germany and euro zone. Speakers: Bank of England MPC member Megan Greene, ECB President Christine Lagarde, Fed Chair Jerome Powell. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Sponsors are not involved in the creation of newsletters or other Reuters news content. Advertise in this newsletter or on Reuters.com Morning Bid is sent every morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.   Want to stop receiving this newsletter? Unsubscribe here. To manage which newsletters you're signed up for, click here. Reuters Terms & Conditions and Privacy Statement © 2023 Thomson Reuters. All rights reserved. 3 Times Square, New York, NY 10036