By Lawrence White
LONDON (Reuters) -Stocks and bonds worldwide were listless on Monday, as markets tiptoed tentatively into a week packed with central bank meetings and U.S. inflation data that could make or break hopes for a rapid-fire round of interest rate cuts early next year.
An upbeat U.S. payrolls report has already seen investors scale back expectations for a March cut by the Federal Reserve, though May remains priced at a 76% chance.
The Fed is considered certain to hold rates at 5.25-5.50% this week, putting the focus on the so-called dot plots for rates and Chair Jerome Powell’s press conference.
The consumer price report for November on Tuesday will also influence the outlook, with analysts forecasting an unchanged headline rate and a 0.3% rise in the core.
“We look for another Fed-friendly CPI report but, barring surprises, anticipate the policy statement to signal that economic conditions have not changed enough for officials to drop their tightening bias just yet,” said John Briggs, global head of strategy at NatWest Markets.
“We think Powell will leave the option of a possible hike on the table, but the hurdle seems quite high for the Fed to follow through,” he added.
The European Central Bank, Bank of England (BoE), Norges Bank and the Swiss National Bank (SNB) all meet on Thursday, with Norway the only one viewed as possibly raising rates. There is also a risk the SNB may toy with renewed intervention to weaken the franc.
With so much riding on the outcomes, investors were understandably cautious and MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.29%, while Europe’s benchmark STOXX index nudged down 0.06%.
U.S. stock index futures were similarly muted, with S&P 500 e-minis down 0.08% and Nasdaq 100 e-minis down 0.18% ahead of the U.S. market open..
BONDS FOR SALE
The Treasury market faces a test of its own in the shape of $108 billion in new supply of three-year, 10-year and 30-year paper. Yields on 10-year notes were steady at 4.25% having risen on Friday in the wake of the jobs report, though they still ended flat on the week. [US/]
Euro zone bond yields edged lower, with investors on hold ahead of the slew of central bank data later in the week.
In currency markets all eyes were on the yen as speculation swirled as to whether the Bank of Japan would signal another step away from its super easy policy at a meeting next week.
The dollar rose to touch 146.12 yen on Monday after analysts at Goldman Sachs said in a note the Bank of Japan could disappoint overseas investors by not moving this month.
That move reversed some of the steep fall against the Japanese currency late last week, when bets grew that the Bank of Japan may end negative interest rates as soon as next week.
The dollar also gained on the euro at $1.0765, which was pressured by market pricing for early ECB rate cuts. [FRX/]
In commodity markets, gold took a knock after the jobs report and was last down at $1,997 an ounce. [GOL/]
Oil prices held steady, after sliding 3.9% last week to five-month lows amid doubts that all OPEC+ members would stick with supply cuts. Prices got some support when Washington announced it would rebuild its strategic oil reserves. [O/R]
The market will also be watching the outcome of the COP28 climate summit, which is working on a first-of-its-kind deal to phase out the world’s use of fossil fuels.
Brent was down 54 cents at $75.3 a barrel, while U.S. crude fell 60 cents to $70.65.
(Reporting by Wayne Cole and Lawrence White; Editing by Sam Holmes, Edwina Gibbs, Alex Richardson and Susan Fenton)
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