From Marc to Market:
Overview: The focus is squarely on the Federal Reserve today. There is nearly universal agreement that it will lift the target by 25 bp. The market is inclined to see the shift as a sign that the Fed is nearing the end of its tightening cycle, and sees, at most, one more quarter-point hike. Despite the Fed's warnings, including in the December FOMC minutes, about the premature easing of financial conditions, the market has done precisely that. Moreover, the market remains convinced that a rate cut will be delivered by the end of the year. The key issue then is the Fed's response. Reiterating the December dot plot or claiming that while progress is being made, that the Fed's work is not done, may not be enough to put the proverbial toothpaste back in the tube. That said, the market often has reacted one way to the Fed's statement and another to the press conference.
If month-end positioning weighed on risk-taking appetites yesterday, the start of February has seen them return. Asia Pacific equities mostly trading higher, with more than 1% gains in Hong Kong, Shenzhen, Taiwan, and South Korea. Europe's Stoxx 600 is posting a small gain, the first this week. US futures are 0.3%-0.4% lower. Benchmark 10-year yields are a little softer in the Europe and the US. The US 10-year yield is off more than two basis points to slip back below 3.50%. The US dollar is softer except against the Canadian dollar, where it is virtually unchanged at the time this is written. Relatively narrow ranges are prevailing. The greenback also is mostly softer against emerging market currencies. Gold recovered from yesterday's test on $1900 and is trading quietly between $1923 and $1930 today. OPEC+ meeting is not expected to result in a change in output plans. March WTI recovered from a nearly three-week low yesterday near $76.55 to reached almost $79.75 today, despite API's estimate of s build of more than 6 mln barrels, which is confirmed by the EIA, would be the longest building streak since 2020....
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