investors await Fed interest rates move

U.K. annual inflation increased from 10.1% in January to 10.4% in February, official figures showed. Economists in a Refinitiv poll expected a 9.9% increase.

Core inflation, which excludes energy, food, alcohol and tobacco, rose from 5.8% to 6.6%; while monthly inflation was up from 0.7% to 1%.

The primary driver of year-on-year inflation was housing and household services, chiefly electricity and gas bills, the Office for National Statistics said.

The monthly change was fueled by restaurants and cafes, food, and clothing, though partly offset by declines in recreational and cultural goods and services, as well as motor fuels, the ONS added.

The details in the inflation print will be closely-watched by the Bank of England’s Monetary Policy Committee, which meets Thursday for its latest interest rate decision after its 50 basis point hike in February.

Markets are now pricing in a 61.6% chance of a 25 basis point hike, up from around 57% on Tuesday, Reuters reported.  

— Jenni Reid

Treasury Secretary Janet Yellen said Tuesday that while authorities believe they’ve taken sufficient action to stem liquidity problems in the banking sector, the government is prepared to guarantee even more deposits if the banking crisis gets worse.

“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system,” she said in remarks prepared for a speech to the American Bankers Association. “And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

— Tanaya Macheel, Jeff Cox

China’s president, Xi Jinping, will wrap up his visit to Russia soon, and analysts argue Beijing will leverage its strong position to make gains from President Vladimir Putin.  

“Putin is weak, coming into these negotiations from real vulnerability,” said Timothy Ash, emerging markets strategist at BlueBay Asset Management, adding, he wondered “what price Xi will extract for saving Putin … he has to get something out of it.”

Overall, China has an upper hand economically over Russia, said Alicja Bachulska, policy fellow at the European Council on Foreign Relations. “If China supports Russia in a more substantial way this will continue even more,” she added.  

Read the full story here.

— Yeo Boon Ping, Holly Ellyatt

Tech investor Paul Meeks has been bearish on tech for some time, but is finally beginning to warm up to the sector.

“I’m creeping back into the sector after long advocating an underweight position in it,” he told CNBC on Friday. He joins a chorus of investors who have turned more bullish on the sector in recent weeks.

Pro subscribers can read more about Meeks’ top stock picks here.

— Zavier Ong

Morgan Stanley says it’s “time to turn bullish” on Asia and emerging markets’ growth stocks.

While markets may be pricing in a rate hike at the Federal Reserve’s March meeting, many also expect rate cuts later this year. Easing financial conditions should benefit growth stocks, the strategists said.

CNBC Pro subscribers can read more here.

— Jihye Lee, Christine Wang

As the Federal Reserve is looking to announce its latest monetary policy decision on Wednesday, Insight Investment believes that inflation will continue to remain high in 2023.

“The 2% inflation objective is unlikely to be realized in 2023 but there is some hope that we may see a more normal inflation environment by 2024,” Brendan Murphy, Head of Core Fixed Income, North America wrote in a Tuesday note.

“As the lagged effect of the Fed’s policy rate increases along with the more recent tightening of financial conditions associated with the banking sector concerns works their way through the economy, the effects are likely to be disinflationary. Those same conditions present many risks to the growth picture,” Murphy added.

Insight Investment expects the central bank will raise interest rates by 25 basis points on Wednesday, but added that “the recent market volatility could be an opportunity for them to pause at this meeting.”

“The argument for a pause is strong as another 25bp increase could be seen as contributing to market volatility and financial instability,” said Murphy.

“However, not delivering on 25bps might cause some to question the Fed’s resolve in bringing inflation lower which could create a whole new set of problems. Pausing may lead to an easing of financial conditions that work against their inflation goals.”

— Hakyung Kim

European markets are set to open in positive territory on Wednesday as investors look ahead to the next monetary policy decision by the U.S. Federal Reserve.

The U.K.’s FTSE 100 index is expected to open 8 points higher at 7,545, Germany’s DAX 45 points higher at 15,238, France’s CAC 18 points higher at 7,125 and Italy’s FTSE MIB up 92 points at 26,157, according to data from IG.

On the data front, the U.K. inflation rate for February will be released.

— Holly Ellyatt