Fed Meets

The Federal Reserve looks set to deliver a fourth straight super-sized rate increase with Chair Jerome Powell repeating his resolute message on inflation and opening the door to a downshift — without necessarily pivoting yet. The Federal Open Market Committee is expected to raise rates by 75 basis points on Wednesday to a range of 3.75 to 4%, the highest level since 2008 as the central bank extends its most aggressive tightening campaign since the 1980s. The decision will be announced at 2 p.m. in Washington and Powell will hold a press conference 30 minutes later. No fresh Fed forecasts are released at this meeting. The central bank chief may emphasize policymakers remain steadfast in their inflation fight, while leaving options open for their gathering in mid-December, when markets are split between another big move or a shift to 50 basis points. .

Credit Suisse Downgrade

Credit Suisse’s long-term rating was downgraded by S&P Global Ratings, underscoring the challenges to achieve a turnaround after the bank laid out a radical restructuring plan last week. “We see material execution risks amid a deteriorating and volatile economic and market environment and note that some details around asset sales remain unclear,” S&P said as it cut Credit Suisse’s long-term rating to BBB- from BBB, with a stable outlook. Credit Suisse’s Chairman Axel Lehmann has said a 4 billion Swiss franc ($4 billion) capital increase will make the lender “rock solid,” helping it to carry out a vital restructuring that radically downsizes the loss-making investment bank and shrinks its trading operations. 

Denmark’s Election

Denmark’s Social Democratic Prime Minister Mette Frederiksen was unexpectedly set to win a majority in a nail-biter general election, putting her on track to secure another four-year term. Frederiksen and her allies in the left-leaning red bloc won 87 seats as all votes had been tallied, after early polling indicated she would falter. That compares with 72 mandates for the right-wing opposition blue bloc and 16 for a newly emerged center party the Moderates, which had been widely expected to become a kingmaker following the vote. Frederiksen has spoken about a broad government, going as far as to propose forming a grand coalition spanning the political spectrum.

UK Inflation

Prices in British shops rose by the highest rate since at least 2005 last month as the cost-of-living crisis piles pressure on consumers. The British Retail Consortium said shop-price inflation accelerated to 6.6% in October, a record for the index which started 17 years ago, and up from 5.7% in September. Food price increases hit 11.6%, another record, with tea bags, milk and sugar all experiencing significant hikes. Inflation has become impossible for shoppers to avoid, with rising bills across food, fuel and energy. Consumers are trying various methods to save money on their weekly shop, visiting rival retailers and choosing own-label brands. 

Coming Up…

European equities are poised for a modest advance ahead of the Fed’s widely expected 75-basis point hike. Boeing is likely to provide its first meaningful guidance since early 2019 as it hosts an investor event. The Bank of Ireland holds its Financial System Conference. The World Business Forum begins in New York. Expected data include manufacturing PMIs from Spain, Italy, France and Germany, as well as German unemployment claims. 

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(Source: Bloomberg, Nov. 2-2022)