Emerging Markets | Europe | Monetary Policy & Inflation | UK | US
Markets to Watch This Week: Time to Reconsider a 75bp Fed Hike in December
- By Bilal Hafeez and Ben Ford
- 3 min read
We standardise WoW price changes across different markets to allow for cross-market comparisons.
Market Moves
US markets were data-light in a Thanksgiving-focused week. Investors took the opportunity to further moderate their expectations for the Federal Reserve (Fed) on the back of dovish minutes; the US OIS-based terminal Fed funds rate has inched 5bp lower on the week. Consequently, US equities rose (S&P 500: +1.5% WoW; NASDAQ: +0.7% WoW).
While markets are determined for the Fed to decelerate in December, the outlook for the European Central Bank (ECB) has become less certain. German two-year yields paced higher (+9.7bps WoW; Chart 2) as European manufacturing PMIs surprised to the upside last week and ECB speakers turned more hawkish. Notably, ECB Board Member Isabel Schnabel sees ‘limited’ room to decelerate hikes (i.e., hike 50bp in December). Meanwhile, ECB Governing Council Member Madis Muller sang from the same hymn sheet. Markets ended the week assigning a 50% chance of a 75bp hike on 15 December – in line with Henry’s bias.
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