Marketmind: Peak hawkishness?

A look at the day ahead in markets from Saikat Chatterjee.

Hopes raised by latest U.S. CPI numbers that surging inflation may finally be peaking appear to have finally halted a rout in bond markets, meaning even hawkish comments from the Federal Reserve’s James Bullard have not caused a stir.

And note that while New Zealand’s central bank just hiked interest rates by a hefty 50 basis points in its biggest hike in over two decades, it tempered its hawkish stance by keeping its previous forecast for rates to peak around 3.35% by-end 2023.

So, that’s kept the kiwi dollar from rallying sharply.

The dollar’s march higher too has stalled and yields on 10-year U.S. Treasury notes are holding below 3-year highs.

Even mixed Chinese trade data with imports unexpectedly declining in March failed to dent broader sentiment with an Asian stock market gauge up more than 1%, while U.S. stock index futures are pointing higher.

European stock index futures are struggling to advance meaningfully after Russian President Vladimir Putin said that on-and-off peace negotiations with Ukraine “have again returned to a dead-end situation for us.” This also weighed on the euro.

Oil consolidated gains after a hefty overnight rally with Brent crude futures settling comfortably above the $105 barrel, pushing inflation expectations higher across the board. Expected inflation in Germany via breakeven rates have jumped above 6%, the highest since data going back to 2009.

In geopolitics, U.S. President Joe Biden said for the first time that Moscow’s invasion of Ukraine amounts to genocide. His public approval ratings declined to 41% according to a Reuters/Ipsos opinion poll.

Closer to home, British Prime Minister Boris Johnson apologised but defied calls to resign after being fined for breaking coronavirus lockdown rules by attending a gathering in his office to celebrate his birthday.

Key developments that should provide more direction to markets on Wednesday:

– UK inflation jumps to 30-year high of 7.0% in March

– Data corner: US PPI

– Bank of Canada interest rate decision

– Earnings: JP Morgan, Blackrock

– Benetton team working on premium of around 30% to buy out Atlantia

– OPEC cuts 2022 world oil demand forecast due to Ukraine war

(Reporting by Saikat Chatterjee; Editing by Dhara Ranasinghe)