Bouncing back

Stock markets settle down

Stock markets are bouncing back on Tuesday as some calm returns following the UBS takeover of Credit Suisse and traders look ahead to the Fed tomorrow.

It’s been a wild couple of weeks and while I, along with everyone else, am hopeful that the worst is behind us, I can’t say I’m particularly confident. The response to recent events has been impressive from central banks, regulators, and governments, and while we can commend them for their firefighting skills, only time will tell if they’ve been successful in extinguishing the flames.

But markets are clearly comforted by the measures that have been put in place to prevent a full-blown banking crisis. If this can be followed by a few days of calm with no other banks emerging as being at risk of collapse without major intervention, stock markets could continue to recover.

At the same time, I would expect interest rate expectations to rise as the risk of imminent contagion and recession decrease. I’m not sure they’ll quite revert back to where they were as investors and central banks will be bruised by events of the last couple of weeks and perhaps a little more cautious for now.

That adds another layer of intrigue to the Fed decision tomorrow that stretches well beyond whether it hikes by 25 basis points or not. The messaging will be crucial and could be a major driving force in markets, barring further upheaval in the banking sector.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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