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Marketmind: Beneath arrest

© Reuters. FILE PHOTO: Customers at the Edeka grocery store buy pasta, as the spread of coronavirus disease (COVID-19) continues in Duesseldorf, Germany, April 29, 2020. REUTERS/Wolfgang Rattay/File Photo

A look at the day ahead in European and global markets from Anshuman Daga

The arrest of FTX’s former CEO Sam Bankman-Fried in the Bahamas at the behest of U.S. prosecutors, just a month after the cryptocurrency exchange filed for bankruptcy, is turning out to be the headline of the day.

And for financial markets caught in a holding pattern, U.S. inflation data due later on Tuesday is shaping up as a key event, probably more important for the outlook than tomorrow’s interest rate decision by the Federal Reserve.

Asian stocks were in a wait-and-watch mood on Tuesday while the dollar, which has been lifted by high and rising interest rate expectations, held firm.

In Europe, markets will focus on economic sentiment data from Germany, the region’s biggest economy, where the ZEW survey will be released. Inflation data is also due out in Germany.

Investors generally remain on alert to risks of further increases in borrowing costs hurting economies, although central banks are beginning to slow their aggressive rate rises.

Runaway inflation has forced developed economies to raise borrowing costs by a combined 25.15 percentage points this cycle, the most aggressive in decades.

The rate of price increases is beginning to slow in the United States but investors need more evidence to underscore that trend, which could limit any policy shocks from the Fed.

Economists polled by Reuters expect U.S. core inflation to be steady at 0.3% month-on-month but see moderation in the annual pace, with headline prices seen 7.3% higher than a year earlier.

Big moves on CPI days https://www.reuters.com/graphics/USA-STOCKS/WEEKAHEAD/egpbyykqmvq/chart.png

The New York Fed’s latest survey showed that Americans expected waning inflation pressures over the next few years even as they expect their incomes to perk up.

Despite the double whammy of double-digit inflation and rising energy costs, travel demand remains strong, with TUI, the world’s largest holiday company, setting its sights on strong business in the summer of 2023.

Meanwhile, Britain’s National Grid (LON:) cancelled standby notices for two coal units, a few hours after issuing the requests, as a cold snap gripped the country but high nuclear output and wind speeds reduced the chance of energy shortages.

Key developments that could influence markets on Tuesday:

Economic data: UK Oct labour market, Germany Nov inflation final, Germany Dec ZEW survey

Events: Fed starts 2-day meeting, BoE publishes Financial Stability Report

U.S. data: Nov inflation

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