Central banks are in the spotlight today with accelerated tightening on the agenda. Last night, the Reserve Bank of New Zealand, who had been raising rates at a pace of 0.25% per meeting for their last few meetings and had been widely expected to hike another quarter point surprised the street with an even more hawkish 0.50% increase to their overnight rate to 1.50%.
This morning at 10:00 am the Bank of Canada is widely expected to raise its benchmark rate by 0.50% to 1.00% after raising 0.25% at its last meeting. Canada’s central bank is also expected to start Quantitative Tightening by ending the purchase of new bonds to replace maturing ones. Investors may also look to the statement and the Monetary Policy Report for indications on the outlook for the economy, inflation, and interest rates or the bank’s balance sheet.
Central banks remain under pressure to do something to contain accelerating inflation. US producer prices jumped even more than feared (11.2% vs street 10.6% and previous 10.3). UK inflation reports showed rising inflation pressures across the pond as well, most notably their consumer price report (7.0% vs street 6.7% and previous 6.2%).
A day after US indices failed to hold on to moderate morning gains turned into moderate losses by the close, US index futures had tried to rebound earlier this morning but as the exchange open approaches, futures have been fading and are currently flat to down slightly. Over in Europe, where investors are waiting to see what the European Central Bank might try and do about inflation tomorrow, the Dax is down 1.0% and the FTSE is flat.
Earnings season is underway today, led by JPMorgan Chase who missed on earnings ($2.63 vs street $2.69) and raised loan loss provisions, blaming increased risks to the economy, rising inflation and disruptions form the Ukraine War. Bed Bath and Beyond reported a large surprise loss (-$0.92 vs street +$0.03) noting that even though it did raise prices in the quarter, it wasn’t enough to offset rising costs.
SIA Wealth In The Media:
Chief Market Strategist Colin Cieszynski appeared on BNN Bloomberg today where he discussed the potential for monetary tightening in Canada and elsewhere and the start of earnings season in the US.