| Good morning. It's Fed decision day, the US announces its latest borrowing plan and how macro trades are bouncing back. Here's what's moving markets. — David Goodman The Federal Reserve is poised to hold interest rates steady for a second meeting later today, while leaving open the possibility of another hike as soon as December. Economists expect the rate to stay in a range of 5.25% to 5.5%, a level first reached in July. Chair Jerome Powell, who will hold a press conference after the decision, has signaled that Fed leaders would prefer to wait to evaluate the impact of past increases on the economy as they near the end of their rate-hiking campaign.
Some investors are increasingly worried about the outlook. Billionaire investor Stan Druckenmiller has said he's bought "massive" bullish positions in two-year notes, as he's become more concerned about the economy. The big bond market event today is at the Treasury, not the Fed, according to Bloomberg's chief correspondent for global macro markets Liz Capo McCormick. The department is due to announced its latest borrowing plan, and Wall Street bond dealers expect another round of increases to note and bond auctions. Still, a sizable minority forecast the department will slow the pace of growth to avoid jolting yields higher. Against a backdrop of swelling US deficits, the Treasury is set to announce auction details for November through January. The consensus projection for next week's so-called quarterly refunding sales — encompassing three-, 10- and 30-year securities — is for a $114 billion combined slate, up from $103 billion three months ago. Macro trades have bounced back to become the best performing hedge fund strategy in the third quarter, turning a page on a dismal first half that saw economic uncertainty weigh on managers. Asset-weighted returns for macro funds hit about 3.1% in the three months through September, according to data from fund administrator Citco. That's in contrast with multi-strategy and equities funds, which saw muted losses of around 0.1% and 0.5% respectively. Sticking in the world of hedge funds, as today's Big Take shows, wild swings in Treasuries are luring them back into the market. US stock futures slipped and Treasuries edged higher ahead of the Fed decision and the US government's new borrowing plan. Contracts on the S&P 500 and the Nasdaq 100 dropped by about 0.3%.
WeWork plunged 42% in premarket trading after the Wall Street Journal reported that the company plans to file for bankruptcy as early as next week.
Oil climbed after slumping in the first two days of the week, as a still-contained Israel-Hamas war shifted attention to global demand. The Fed's rate decision and an accompanying statement will be released at 2 p.m. in Washington while Powell will hold a press conference 30 minutes later. The Treasury announcement comes a few hours earlier at 8:30 a.m.
The US also sees mortgage application, manufacturing and job openings data, while ADP gives its latest estimate for employment change. Earnings include PayPal, Airbnb and Kraft Heinz. This is what's caught our eye over the past 24 hours. Hello and welcome to Fed Day. I think it's fair to say that this was one of the least anticipated Fed decisions in a while. Virtually nobody expects there to be a rate hike today. And there aren't new dots at this meeting, so there's not even that to look forward to.
Could there be any drama at all? In a note to clients yesterday, Steven Englander of Standard Chartered laid out what could at least theoretically be the potential stakes of today's decision. ``The biggest market mover is likely to be any hint that Fed Chair Powell provides on whether the last 2023 hike in the Summary of Economic Projections (SEP) is on or off the table. The December FOMC has only 6bps priced in, so making it 'live' rather than dormant would be a surprise. A strong hint that the FOMC will hold in December would probably be read as signaling that the hiking cycle is over. However, with two CPI and labor releases between the 1 November and 13 December FOMC meetings, he is unlikely to lean strongly either way.''
In other words, right now the market doesn't see much of a chance of a rate hike in December. So the only question is whether Powell opens the door to it in some way or not. In the meantime, it's not just Fed day. It's also JOLTS Day. Of course, JOLTS Day is one of those things that hardly anyone ever really observed up until the last two years. But now people watch the Job Openings number. And the expectation is that for September, there were 9.4 million jobs, down from 9.61 million. It seems plausible that an upside surprise on this number could cause investors some anxiety. Speaking of the labor market, yesterday we got the latest Conference Board Consumer Confidence Index. And one thing that stood out is that the Labor Differential measure -- the gap between the number of respondents who say that jobs are plentiful vs. the number who say that jobs are hard to get -- actually ticked up a little bit in October. We're below the peak on this measure, and actually even below 2019 levels. But it's still very high by historical standards. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
No comments:
Post a Comment