Morning Bid Americas: Markets in a spin ahead of interest rate decisions

Credit Suisse AG

12/06/2023 11:00

June 12 (Reuters) - A look at the day ahead in U.S. and
global markets from Dhara Ranasinghe. 
   
It's a big week for markets with interest rate decisions from
the three major central banks coming one after another. And one
take away from last week's surprise rate increases in Canada and
Australia, is not to take anything for granted.
    World shares were steady near last week's 13-month highs on
Monday, with European shares a touch firmer and U.S. stock
futures pointing to a positive open for Wall Street.
    In short, investors are biding their time - with May U.S.
inflation data on Tuesday, released as the U.S. Federal Reserve
kicks off a two-day meeting, event risk is high.
    The Fed is widely expected to "skip", note, not "pause"
hiking rates in June when it concludes its meeting on Wednesday.
The European Central Bank is tipped to deliver a quarter-point
rate hike on Thursday, while on Friday the Bank of Japan is
expected to maintain ultra-loose monetary policy.
    The debate in market circles has shifted in recent months.
First, most major central banks (not the BOJ of course) were
expected to pause after a series of rate hikes and move to rate
cuts later in the year. Now any rate-hike pause is suspected to
be followed by further tightening (not easing) to contain sticky
inflation. 
    Last week's rate decisions support this idea  -- the Bank of
Canada hiked rates last Wednesday to a 22-year high of 4.75%,
having held rates steady since January. A day earlier,
Australia's central bank raised rates by a quarter point to an
11-year high and warned of further tightening ahead. 
    Those surprise decisions suggest that the rate trajectory
traders have mapped out and priced in one day can quickly be
made redundant the next.
    Citi strategists said the Fed could be faced with the lesson
that central banks such as Canada's have learned – further
tightening is still needed to bring inflation to 2%.
    With the U.S. debt ceiling wrangling over, focus may also
turn to Monday's bill auction with the U.S. Treasury expected to
ramp up bill sales from here. 
    Analysts estimate that in the week ahead, the Treasury may
raise close to $400 billion between bills and coupons after
selling almost $330 billion of bills last week.
    In Europe, UBS  UBSG.S  on Monday said it had completed its
emergency takeover of embattled local rival Credit Suisse
CSGN.S, creating a giant Swiss bank with a balance sheet of $1.6
trillion and greater muscle in wealth management.
    Switzerland must now contend with a bank whose balance sheet
is twice as big as its economy, while Sergio Ermotti, who was
brought back in as CEO to oversee the mega merger, faces tough
strategic decisions as UBS integrates its smaller rival against
an uncertain economic backdrop.    
    Events to watch for later on Monday:
    * Auctions: U.S. bills, 3-yr bonds. 
    * U.S. May Federal Budget 

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The Fed expected to take a pause on rate hikes    https://tmsnrt.rs/3WQe9Sz
UBS vs Credit Suisse - total assets    https://tmsnrt.rs/3WJ4GfA
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 (Reporting by Dhara Ranasinghe, editing by Ed Osmond)
 ((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))