World stocks stuck around record highs as investors turned their attention to China and Switzerland as the next central banks to add vim to the global economy with rate cuts after last week’s decisive move by the U.S. Federal Reserve.
Stock markets in Tokyo were closed for a holiday but futures trading suggested these recent laggards would join the party with Nikkei contracts were trading at 38,510 compared to a cash close of 37,723. But Christoph Schon, multi-asset strategist at Simcorp, warned a recession in the U.S. might still be imminent and noted that the last two times the Fed started with a 50 bps cut was in 2008 and 2001, which were years of severe downturns.
Not much caution was evident in markets on Monday, however, as Europe’s Stoxx share index held steady and futures trading indicated Wall Street was set for a strong session. The importance of U.S. monetary policy was “hard to overstate, given the Fed’s role in USD liquidity conditions worldwide,” Barclays economist Christian Keller said.Market exuberance may also depend on what the Fed’s preferred inflation gauge, the core personal consumption expenditures show on Friday. Analysts expect a 0.2% month-on-month rise taking the annual pace to 2.7%, while the headline index is seen slowing to just 2.3%.
One bank not easing is the Reserve Bank of Australia which meets on Tuesday and is considered almost certain to hold at 4.35% as inflation proves stubborn. (0#RBAWATCH>
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