U.S. stock futures surged on Monday, propelled by investor anticipation of the upcoming monetary policy decision from the Federal Reserve later this week. This surge comes amidst evolving sentiments regarding the trajectory of interest rates, fueled by recent spikes in inflationary figures.
Futures tied to the Dow Jones Industrial Average witnessed a 0.2% increase, reflecting a gain of 60 points subsequent to the index’s 190-point decline on the preceding Friday, concluding at 38,714. Meanwhile, S&P 500 futures surged by 0.7%, paralleled by a 1.1% ascent in contracts linked to the tech-focused Nasdaq. Concurrently, the yield on the benchmark 10-year U.S. Treasury note maintained stability at 4.3%.
The impending week promises a flurry of central bank activities, with the spotlight firmly fixed on the Federal Reserve in the United States. The Fed’s monetary policy committee is scheduled to convene across Tuesday and Wednesday amid widespread expectations of maintaining the current interest rates.
Jim Reid, a strategist at Deutsche Bank, remarked, “This could be a landmark week in markets as the last global holdout on negative rates looks set to be removed as the Bank of Japan likely hikes rates from -0.1% tomorrow. That could slightly overshadow the Federal Open Market Committee that concludes on Wednesday that will have its own signaling intrigue given recent strong inflation.”
Preceding the pivotal Fed decision, market players will be closely monitoring the actions of the Bank of Japan, which is poised to elevate interest rates from negative territory for the first time in eight years. Such a move is anticipated to reverberate beyond the confines of the Asian economy, potentially impacting global financial dynamics.
Nevertheless, within the United States, the Federal Reserve looms large, with the prevailing narrative in markets revolving around the dual concerns of interest rates and inflation. This sentiment has been exacerbated by recent data revealing persistent inflationary trends, consequently pushing back expectations for an initial rate cut.
Jim Reid further observed, “Futures are now pricing only a 61% chance that the Fed will cut by June. At the start of March, markets had seen a 96% chance of a cut by June.”
