Danish stocks move in both directions; El-Erian suggests 50 bps Fed hike; Wall Street bullish on Chinese tech, Fed likely to discuss end of hikes.
The European markets are expected to open positively on Tuesday, with the FTSE 100 index expected to open 10 points higher at 7,801, Germany’s DAX 18 points higher at 15,122, France’s CAC up 12 points at 7,049 and Italy’s FTSE MIB up 81 points at 25,945, according to data from IG. Danish stocks were the biggest movers in both directions at Tuesday’s open, with insurance company Topdanmark adding 3.7% to lead the Stoxx 600, while hospital equipment maker Ambu fell 4.6% after SEB cut the stock to “sell” from “hold”.
Allianz Chief Economic Adviser Mohamed El-Erian believes that the Federal Reserve should not downshift to a 25 basis point hike at the next policy meeting, but rather should take advantage of the current growth window and tighten financial conditions by increasing the rate by 50 basis points. El-Erian believes that inflation has shifted from the goods to the services sector, but could resurge if energy prices rise as China reopens. He expects inflation to plateau around 4%, which will put the Fed in a difficult position as to whether they should continue crushing the economy to reach 2%, or promise that level in the future and hope investors can tolerate a steady 3% to 4% nearer term.
Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as a top pick for many. The Federal Reserve officials next week are almost certain to approve another deceleration in interest rate hikes while also discussing when to stop the increases altogether. A series of rate hikes begun in March 2022 has resulted in increases of 4.25 percentage points, and markets are currently indicating quarter-point hikes at the next two meetings, a period of no action, and then up to a half-point reduction by the end of 2023.
In conclusion, the European markets are expected to open positively on Tuesday, with Danish stocks leading the charge. Allianz Chief Economic Adviser Mohamed El-Erian believes that the Federal Reserve should increase the rate by 50 basis points. Chinese tech stocks are back on Wall Street’s radar, and the Federal Reserve is expected to approve another deceleration in interest rate hikes while also discussing when to stop the increases altogether. Market pricing is currently indicating quarter-point hikes at the next two meetings, a period of no action, and then up to a half-point reduction by the end of 2023.
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