Stock futures hovered on Tuesday as investors continued to revel in an expected loosening of monetary policy in 2024 amid a ‘soft landing’ for the economy.
Some Fed officials in recent days appeared to push back against the market’s hopes for lower borrowing costs as early as March, but equity investors seem to have shrugged off those comments, for now.
Meanwhile, the Bank of Japan reminded traders that an important spigot of cheap money still remains open.
The BOJ left its main interest rate at minus 0.1%, and in the accompanying news conference, Governor Ueda provided little evidence he was minded to exit the central bank’s ultra-loose monetary policy anytime soon, despite inflation running above its 2% target for 19 consecutive months.
Traders were also warily eyeing the oil market, after benchmark Brent crude jumped on Monday following BP’s statement it was halting shipments through the Red Sea , and thus the Suez Canal, because of attack’s by the Houthi in Yemen.
Many of the world’s biggest shipping companies have said they also will steer clear of the region, prompting concerns about rising costs that may build inflationary pressures.
“An extended period of disruption in global trade ways should not only sustain energy prices, but also put a renewed pressure on global supply chains and shipping prices,” Swissquote Bank said.
“The latter is a threat to inflation. Remember, the pandemic-related supply chain disruptions were the major reason that sent inflation to almost 10% in the U.S.,” it added.