A look at the day ahead from Saikat Chatterjee.
World stocks may be taking comfort from signs that central banks will keep the stimulus taps open but the chorus of hawks making the case against is on the rise.
And so New Zealand's dollar is up 1% this morning after the country's central banks signalled at least one quarter point hike by September 2022.
Wellington's decision comes at a time when Federal Reserve policymakers have begun to acknowledge they are closer to debating when to pull back some of their crisis support. The shift in tone is a change from just a month ago when Chair Jerome Powell said it was "not yet" time to even contemplate having that conversation.
Markets, for now, are ignoring the shift in central bank speak with Asian stocks a sea of green in holiday-stricken trade while European and U.S. stock futures broadly higher.
Asian stocks were a touch firmer as a daily currency fixing by the Chinese central bank to near three-year highs was taken as a sign of optimism by investors.
In currencies, the dollar struggled near its lowest levels this year thanks to a flying kiwi and a stronger yuan.
Bond markets also remained sanguine on the outlook of monetary policy. Fed’s vice chair Richard Clarida’s comments on Tuesday to engineer a "soft landing" as stimulus is withdrawn and keep a lid on inflation kept Treasury yields within the well-worn established ranges since March.
In the euro area, comments from ECB board member Fabio Panetta that the bank should not reduce the pace of asset purchases after its June 10 meeting is keeping German Bund yields below last week's 2-year high.
A weaker dollar pushed gold prices above the key psychological level of $1,900 per ounce, while Bitcoin stabilised around the $40,000 mark after a roller coaster ride.
In corporate news, Volkswagen's board agreed Lamborghini would remain part of the company after it received a 7.5 billion euro offer for the supercar brand. Britain's competition regulator is reviewing AstraZeneca’s planned $39 billion takeover of U.S.-based Alexion on whether it could reduce competition in Britain or other markets. Key developments that should provide more direction to markets on Wednesday:
- British Prime Minister former advisor Dominic Cummings to give testimony on the UK handling of the pandemic.
- Swedish Riksbank Financial Stability Review.
- Central bank speaker corner: France’s Villeroy, Canada’s Lane, Fed’s Quarles.
- Data: French business confidence, manufacturing confidence, US Mortgage Applications
(Reporting by Saikat Chatterjee; Editing by Dhara Ranasinghe)