Roughly 20 central banks are meeting this week, and the Federal Reserve is expected to cut bond purchases and signal an interest rate takeoff in 2022, heralding a historic turnaround to counter the fastest inflation since the 1980s. The European Central Bank, the Bank of England and the Bank of Japan are also ready to announce their monetary policy decisions.
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- “The Fed’s shift toward a more aggressive reduction program poses a greater risk to asset prices than most investors believe. Good news, the offer is improving, but will it come at the wrong time? ”Wrote strategists at Morgan Stanley, including Mike Wilson.
- “As long as the Fed does not deliver a materially aggressive surprise this Wednesday (which is possible, but unlikely), stocks may rebound at the end of the year on impulse, even if valuations are stretched again,” wrote Tom Essaye, a former Merrill Lynch merchant who founded “The Sevens Report” newsletter.
- “We do not expect the Fed to hit the brakes to drown liquidity, but rather we want it to ‘hit the brakes’ as lightly as it can as it phased out emergency stimulus mechanisms,” wrote John Stoltzfus, chief investment strategist. in Oppenheimer.
The specter of the tech bubble could soon return to haunt investors as strong valuations may be threatened by a likely tightening of monetary policy. The long-term price-to-earnings ratio of the S&P 500, which compares the current price to the 10-year average real earnings per share, has reached 37, a level last seen in 2000.
“Valuations are extremely high on almost any metric,” strategists at Deutsche Bank AG said in a note.
Inflation expectations among American consumers rose to a new high of 6% for next year, according to the latest consumer survey from the Federal Reserve Bank of New York. The study showed that Americans anticipate faster price increases for items like rent and food, which account for a large part of family spending and cannot be easily substituted.
- Losses for a basket of meme stocks are mounting, and traders are shifting away from riskier assets. GameStop Corp. and AMC Entertainment Holdings Inc. have been the biggest hurdles for the group since mid-November.
- Pfizer Inc. agreed to buy Arena Pharmaceuticals Inc. in a deal valued at about $ 6.7 billion that provides potential therapies targeting immuno-inflammatory diseases.
- Bristol Myers Squibb Co. rose when the drugmaker said it will increase its dividend and buy back up to $ 15 billion in stock.
- Harley-Davidson Inc. jumped after saying it would publicly list its electric motorcycle unit through a merger with a blank check company.
Here are some key events from this week:
- Industrial production in the euro zone, Tuesday.
- US PPI, Tuesday.
- China releases November industrial production, retail sales data, on Wednesday.
- Fed rate decision, Wednesday.
- US Business Inventories, Retail Sales, Empire Manufacturing, Wednesday.
- BOE rate decision, Thursday.
- ECB rate decision, Thursday.
- US Housing Start, Initial Jobless Claims, Industrial Production, Thursday.
- BOJ monetary policy decision, Friday.
- Quarterly rebalancing of the S&P Dow Jones Indices effective after markets close on Friday.
- Day of “quadruple witchcraft” in the US market, when options and futures on indices and stocks expire, Friday.
Some of the main movements in the markets:
- The S&P 500 fell 0.6% at 12:38 p.m. New York time
- The Nasdaq 100 fell 0.9%
- The Dow Jones Industrial Average fell 0.8%
- The MSCI World Index fell 0.6%
- Bloomberg’s dollar spot index rose 0.2%
- The euro changed little to $ 1.1302
- The British pound fell 0.4% to $ 1.3226
- The Japanese yen changed little to 113.43 per dollar
- The 10-year Treasury yield fell six basis points to 1.42%.
- Germany’s 10-year yield fell four basis points to -0.38%.
- The UK 10-year yield fell four basis points to 0.70%.
- West Texas Intermediate crude rose 0.2% to $ 71.83 a barrel
- Gold futures rose 0.2% to $ 1,788.60 an ounce
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