The market is preparing for the Fed meeting minutes: Global overview of trends and expectations

After a tumultuous Tuesday that rocked the US financial markets, Wednesday brought a temporary calm as investors prepared for the latest Federal Reserve meeting minutes. Here's an analysis of what has happened so far and what's to come: US Market: Is it in the process of recovery? The collapse of the third place has heavily affected the US Treasury, with stocks plummeting and Nasdaq 100 recording its sharpest decline in weeks. Large technology companies have been hit hardest by the sell-off, with new fears about inflation and surprisingly resilient economic recovery disrupting traders' expectations of the Federal Reserve cutting interest rates as early as 2024. Futures contracts indicate a slight recovery on Wednesday, while treasury bond yields remain stable and the US dollar rises for the second consecutive day. These modest gains reflect a market that is taking a breather but still grappling with the hawkish stance of the Fed. The shift away from rate cut hopes came after new economic data highlighted persistent inflationary pressures. The ISM services price index surged to a stunning 64.4% in December, up sharply from November's 58.2%, marking the highest level in nearly a year. Meanwhile, robust job openings in November further underscored the economy's recovery potential. Bond market fluctuations: The bond market is not exempt either. The 10-year treasury bond yield surged to 4.699%, the highest level since April, as traders reduced the likelihood of a rate cut in January to only 4.8%, down from the previous day's 8.6%. Global Market: The Paths of Polarization The optimism of Europe shines through The Atlantic, the European market has painted a brighter picture. Stoxx 600 rose on the second day, driven by optimism for a strong 2025. Deutsche Bank strategists highlight improving economic surprises, easing political tensions, and potential stimulus measures from China as the main drivers of this confidence. China struggles with external pressure Meanwhile, Asia is painting a contrasting story. Chinese stocks are plummeting, with the benchmark index hitting its lowest level since September. New concerns about US tariffs and an unstable domestic economy have weighed heavily on investor sentiment. External factors such as geopolitical tensions and weak global demand continue to be key determinants of China's economic prospects. Goods and cryptocurrencies In commodities, oil prices continued their second-day rally, driven by a significant decline in US crude inventories. However, Bitcoin has struggled to find its footing, still below the $100,000 mark after a sharp drop on Tuesday. Fed meeting minutes: The main event of the week At 2:00 p.m. Eastern Time on Wednesday, the Federal Reserve will release the minutes of its most recent meeting, which saw a 0.25% interest rate cut but also presented a somewhat hawkish dot plot. The dot plot - which reflects the rate projections of Fed officials - clearly indicates that the central bank is not yet ready to ease its policy in the near future. With inflation still high and the labor market showing signs of recovery, the market is preparing for the next clues about the Fed's strategy. The minutes will be analyzed to find clues about the timing of future interest rate changes and the Fed's assessment of the current economic situation. Looking ahead: Data and key events The rest of the week will have many important events and data releases: Euro area: PPI and retail sales figures will provide detailed information on inflationary pressures and consumer behavior in Europe. China: CPI and PPI will reflect the country's economic situation amid external challenges. United States: Friday's employment report will be the most important event of the week, providing new insights into the strength of the labor market. In addition, Federal Reserve officials, including Christopher Waller and Patrick Harker, are expected to give speeches, likely to provide further insights into monetary policy. A sad silence: Remembering Jimmy Carter This week also marks the state funeral of former President Jimmy Carter, declared a federal holiday. As the nation pauses to honor his legacy, the market will be watching this event closely for implications. The Road Ahead When the global market is guided in a context shaped by fears of inflation, political tension, and expectations of monetary policy changes, one thing is clear: the volatility will continue. Investors will closely monitor the Fed's meeting minutes to find direction and clarity, knowing that any data point and statement can shift the balance. For both traders and analysts, this week is a crucial chapter in the economic story of 2024. Will the Fed's firm stance hold or will changing dynamics force a readjustment?