President of the European Central Bank (ECB), Christine Lagarde, is due to speak at the World Economic Forum (WEF) in Davos on Friday 19 January, and global markets will be poised to hear her thoughts on global rate cuts and inflation data.
Global markets wait for ECB statement regarding rate cuts
Despite the positive survey from over 60 global chief economists, investors and industry experts are reconsidering when the cuts will come largely because the major global economies have failed to get inflation consistently under its 2% target. Last week, markets predicted a 75% chance of US rate cuts in March of this year. This week, only 57% of experts still hold that view.
As a result of wary market sentiment, gold is at its worst price in six weeks compared to oil, which is ticking upward due to output disruptions and geopolitical tensions in the Middle East.
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The MSCI All Country World Index (MSCI ACWI) was up 0.3% on Thursday despite being 1.4% down overall for January. The index jumped approximately 20% in 2023. However, the strong MSCI performance mid-week is believed to have been caused by a semiconductor rally from Taiwan-based technology company TSMC on Thursday, which subsequently pushed the S&P 500 index to a near-record high.
Mike Hewson, chief market strategist at CMC Markets, expressed concern about over-estimating rate cuts. Hewson noted:
The economic case for rate cuts has not changed. I just think they will come in the second quarter, maybe the ECB a little earlier. We are still range trading, and I think that is going to continue, albeit in a fairly choppy manner until we get some sort of clarity as to whether we can pin down the timing of the first-rate cut.
