2024-08-11 06:45:19
With international equity markets regaining their momentum, covering most of the losses from big sell off at the beginning of the week, expectations for big begin to fade away interest rates reductions by the Fed.
The explosive mix of worse-than-expected US jobs data, rising interest rates in Japan, a consequent rise in the yen and fears of a general conflict in the Middle East sent shockwaves in international markets and fueled fears of a recession in the US economy, prompting calls for bigger, more and faster interest rate cuts from the Fed.
However, those expectations now appear to be fading, as the latest Bloomberg survey showed. In a sign of normalcy returning to markets, MSCI’s index of international shares posted intra-session gains of 0.3% yesterday, just 5.7% away from an all-time high of 832.35 points hit on July 12. while, from the beginning of the year to date, it continues to record gains of 7.5%. Tokyo’s Nikkei closed up 0.6% yesterday, covering most of this week’s losses of 2.5%.
A majority of economists surveyed by Bloomberg see a rate cut of only 25 basis points at the September meeting, a position that contrasts with expectations of a “jumbo” cut of 50 basis points by top Wall Street investment banks. About four-fifths of economists expect the Fed’s key interest rate to be 5% to 5.25% at the September 17/18 meeting.
Some top Wall Street banks, including JPMorgan Chase & Co and Citigroup, reversed course after last Friday’s disappointing labor market data, forecasting a 50 basis point cut. But calls for a “jumbo” cut are overblown and show a “knock-on reaction,” says Ryan Sweet, chief economist at Oxford Economics.
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