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The world’s central banks are in control this week and the biggest surprise so far is that the stock market doesn’t appear all that worried—even during a rare week when all major central banks are scheduled to hold crucial policy-setting meetings.
Dow Jones Industrial Average
futures were down 26 points, or 0.1% while S&P 500 futures were up 0.1%, and Nasdaq Composite futures had gained 0.3%.
Global stocks were doing even better as Europe’s Stoxx 600 index was up 0.6% in early morning trading, while Japan’s
Nikkei 225
had gained 0.7% and the
Shanghai composite index
had advanced 0.4% on the day.
Investors expect the U.S. Federal Reserve to indicate this week that it might phase out its bond-buying program at a faster pace than expected, which in turn could mean an earlier rise in key interest rates next year. Economists at Bank of America to increase the reduction in its bond buying to $20 billion in U.S . Treasurys and $10 billion in mortgage-backed securities, while the dots should show two rare hikes in 2022. “The holidays are here, and the Fed is set to give the gift of a faster taper at the December FOMC meeting,” writes BofA’s Alex Lin.
The market, however, appears to be taking a more hawkish Fed in stride. The 10[year bond yield has slipped 0.033 percentage point to 1.456%Monday, despite inflation that is more than four times that amount. The stock market too refuses to sell off in the face of tighter policy.
“The last tightening cycle sent shock waves around global markets—the taper tantrum,” writes Morgan Stanley’s Seth Carpenter. “This time around, we think global central banks are better situated.”
Some 20 central banks meet this week, however, and it’s less clear what they will do. The Bank of England wants to raise interest rates, but may be forced to delay due to the weakness of the U.K. economy or the impact of the Omicron coronavirus variant. The ECB likely won’t make too many changes, howeverand the Bank of Japan probably won’t make any. “We may see some tweaks from the ECB, but the Bank of Japan has been dovish for decades and sees no reason to move from that posture.,” writes NatAlliance Securities’ Andrew Brenner. “The BOE, who had looked to be the most Hawkish, has their hands tied do to soaring Covid and lockdowns. Expect to see some of the smaller Central banks raise rates.”
The U.S. dollar firmed up against most currencies, up 0.45%
against the euro
and 0.2% against the
British pound,
as currency traders were looking for a balance between Omicron worries and central banks’ concerns about inflation. The Turkish lira was down 2% after ratings agency S&P warned it could downgrade Turkey’s B+ debt rating, due to the central bank lowering rates even as inflation is soaring at an annual 25-to-30%.
Here are seven stocks on the move Monday morning:
Bristol Myers Squibb
(BMY) had risen 1.5% after announcing a dividend increase and raising the number of shares it would repurchase.
Harley-Davidson
(HOG) has jumped 15% after announcing that it would Twenty Central Banks make decisions this week. The Fed is the most important as they are on the cusp of a break out of inflation …We may see some tweaks from the ECB, but the Bank of Japan has been dovish for decades and sees no reason to move from that posture …The BOE, who had looked to be the most Hawkish, has their hands tied do to soaring Covid and lockdowns …Expect to see some of the smaller Central banks raise rates …, LiveWire, and merge it with a SPAC.
Rivian Automotive
(RIVN) has gained 2% after winning MotorTrend’s Truck of the Year award.
Coca-Cola
(KO) has advanced 1% after getting raised to Overweight from Neutral at JPMorgan.
Apple
(AAPL) has risen 1.2% after being reiterated as a top pick for 2022 at JPMorgan.
Pfizer
(PFE) has gained 1.5% after being upgraded to Buy from Neutral at UBS and announcing the acquisition of
Arena Pharmaceuticals
(ARNA) for $6.7 billion. Arena stock has surged 92%.
Daimler Truck
(DGT.Germany), the commercial-vehicle unit spun off Friday by Mercedes maker
Daimler
,
(DAI.Germany), was up more than 9% in Frankfurt, and is now up more than 16% on last week’s opening price.
Telecom Italia
(TIT.Italy) was up 4% on a La Stampa report that private equity group
KKR
might proceed with its bid for the group even if it isn’t allowed a due diligence operation on the company.
Write to Pierre Briançon at pierre.briancon@dowjones.com
Read More: S&P 500 Aims for New High as Stocks Eye Looming Fed Decision