Morning Bid: More than four rate hikes in 2022?

Federal Reserve Board Chairman Jerome Powell leaves after a Senate Banking Committee hearing on The Semiannual Monetary Policy Report to the Congress on Capitol Hill in Washington, U.S., February 12, 2020. REUTERS/Yuri Gripas/File Photo

A look at the day ahead from Sujata Rao.

The world’s largest economy is predicted torecord GDP growth at a 37-year high of 5.5%, with data due later on Thursday. Some such as JPMorgan reckon the figure could be as high as 7.5%. We will also likely see weekly jobless benefits claims dropping further.

That, in a nutshell, is why the U.S. Federal Reserve feels there is “quite a bit of room to raise interest rates”.

Could there be more than four rate rises this year? Powell did not deny that possibility, so markets have started to price a fifth move.

Accordingly, Treasury two-year borrowing costs hit 23-month highs, shrinking the gap with 10-year yields. And on t-bills, the shortest-dated debt segment, Tradeweb notes a sharp steepening, with the gap between the three- and six-month yields at the steepest since 2015, and more than double from a month-ago period.

Similar steepening is notable between other bill maturities in a sign more tightening is being priced.

So the stock market selloff that had abated pre-Fed is back in full swing, with world stocks down 0.6%; European and Wall Street looking set for another tumble.

But if buyers are running scared, there are bargain hunters of a different sort — billionaire William Ackman said he had snapped up $1 billion worth of Netflix shares since last Thursday’s market tumble.

Companies, meanwhile, continue to deliver good news; Tesla for instance predicted 50%-plus growth this year, while Deutsche Bank posted its biggest profit since 2011. But with buyers still in hiding, Tesla shares tanked in after-hours trade.

Key developments that should provide more direction to markets on Thursday:

-China’s industrial firms saw December profits grow at slowest pace in 1-1/2 years read more

-German consumer morale improves slightly

-New Zealand inflation at three-decade high read more

-South Africa expected to raise rates by 25 bps

-U.S. durable goods/advance Q4 GDP reading/initial jobless claims

-U.S. 7-year note auction

-U.S earnings: Blackstone, Dow chemicals, Southwest airlines, McDonalds T Rowe price, Mastercard, JetBlue, Apple, Visa, Mondelez,

-European earnings: LVMH Moet Hennessy Louis Vuitton, Dr Martens, UniCredit Britvic, St. James’s Place STMicroelectronics, SAP, Deutsche Bank, IG Group, Diageo, Sabadell, SEB, Polymetal

Reporting by Sujata Rao; editing by Saikat Chatterjee

Our Standards: The Thomson Reuters Trust Principles.