Stocks see limited respite
|Stock markets are finding some relief after the US debt limit deal was approved by the House, with the Senate’s vote now set to be a formality. Still, risk appetite appears to be muted after the mixed signals this week surrounding China’s recovery, as well as the dwindling prospects of Fed rate cuts later this year.
This Friday’s NFP report as well as the upcoming US CPI data are set to hold sway over the Fed’s next interest rate moves. If hiring momentum in the US jobs market softens meaningfully that should allow the Fed to pause its aggressive rate hikes. Such hopes should carve out more breathing space for the likes of equities and gold.
However, risk assets are likely to face a tough time sustaining a relief rally until US interest rates have well and truly reached their peak, despite recent Fed speak suggesting a June pause. Markets remain cognizant that a recession still looms large on the horizon, with such prospects likely to cap the upside in stocks in the interim.
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