FOMC day

The long-expected hike of 75bp arrived. From Newsquawk:

Stocks and Treasuries were lower while the dollar was bid with markets continuing to react to Wednesday’s hawkish press conference from Fed Chair Powell. Aside from Powell, we saw the BoE and Norges bank rate decisions where the former hiked by 75bps, as expected, but saw two dovish dissenters (Tenreyro even voted for a smaller 25bp hike rather than Dhingra’s choice of a 50bp move). It also noted rates are unlikely to go as high as what markets are pricing in. The Norges bank hiked by 25bps in fitting with prior guidance but was on the smaller side of market expectations. Treasuries saw strong bear-flattening in continued post-FOMC fallout with two-way flows post-BoE. Crude prices saw selling pressure in fitting with risk and a stronger dollar. Attention now turns to US NFP on Friday, where consensus looks for a 200k rise although do note that the White House Press Secretary spoke where she said she expects job gains of 150k over the coming months. There were several data points on Thursday too, the Challenger layoffs saw the highest number of job cuts announced in a single month since February 2021 at 33.8k. The ISM Services PMI fell by more than expected while prices paid rose and employment slipped into contractionary territory. Jobless claims were marginally better than expected while US trade saw a wider deficit than expected. The Q3 labour costs rose 3.5%, less than the 4.1% expectation and cooling heavily from the prior pace of 8.9%, which was revised down from 10.2%. Geopolitical tensions are rife with what appears to be daily missile tests from North Korea and it is something worth keeping an eye on, with the US and others requesting a UN Security Council meeting on Friday to discuss North Korea, while the US and South Korea have pledged to extend military drills in response to the missile firing.

Bear curve flattening is a thing, to be sure. The Treasuries market is definitely predicting a hard landing.