Morning Bid: News vacuum sucks momentum from markets

By Thomson Reuters May 20, 2024 | 11:31 PM

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

Stock market momentum is waning as a dearth of fresh economic clues sees the feverish punting over the pace of Federal Reserve rate cuts finally settle down.

Most Asian equity indexes declined on Tuesday, led by the Hang Seng’s more than 2% retreat from the previous session’s multi-month high. Japan’s Nikkei stood out as the sole beneficiary of the Nasdaq’s record run overnight into Nvidia’s much-anticipated earnings on Wednesday.

AI fever aside, the Fed sits squarely at the center of the market universe, with all asset classes in its orbit. That includes crude oil, gold and base metals, and soaring cryptocurrencies, even if idiosyncratic drivers are also at play.

Investors rushed to reintroduce Fed easing bets after a long-in-coming downside CPI surprise last week, but Fed officials have been less sanguine, collectively striking a cautious posture.

As it stands now, about 40 basis points of easing are priced in for this year, with a quarter-point reduction by November considered a lock, much like where odds stood a week ago.

More Fedspeak is in store today, with Governor Christopher Waller and no fewer than four regional Fed bosses taking the podium at various events. Minutes of the Fed’s last policy meeting due Wednesday will be valuable, but predate the softening in CPI after three straight months of upside surprises.

Elsewhere, Bank of England Governor Andrew Bailey gives a lecture at the London School of Economics. UK CPI will be closely watched, but isn’t due till Wednesday.

Tuesday’s local data docket is light, with the highlight around Europe being German producer price figures for April.

Key developments that could influence markets on Tuesday:

-Germany producer prices (April)

-BoE Governor Andrew Bailey speaks

-Fed Governor Waller, New York Fed’s Williams, Atlanta Fed’s Bostic, Cleveland Fed’s Mester, Boston Fed’s Collins, Richmond Fed’s Barkin all speak at various events

(Editing by Stephen Coates)