European stocks ricocheted from losses to gains after Draghi spoke, and U.S. markets appeared to also catch the wave in pre-market trading. We’ll have to wait and see if this rolls on as the day continues, because traditionally the two days of a Fed meeting are pretty slow and featureless.
As the Fed begins its deliberations, the futures market still suggests low odds of any rate move this week. However, those chances moved solidly higher over the last 24 hours, to nearly 30%. That compares with 15% as of late Monday.
If stocks end up escorts Tokyo on hopes of the Fed cutting rates, it might be worth keeping some perspective. A rate cut still seems unlikely tomorrow, but if it does happen, it’s likely a reaction by the Fed to what it sees as a slowing economy. The “good news” is “bad news” scenario discussed here last week still holds. Many economists see Q2 U.S. gross Tokyo escort product (GDP) and earnings growth slowing from Q1, and that’s not such a good thing.
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