Markets left in limbo
A look at the day ahead in U.S. and global markets from Mike Dolan
A week of conflicting U.S. economic signals was made little clearer by Wednesday's readout of July's Federal Reserve meeting and leaves markets looking overseas for more clues.
Fed meeting minutes were read with a dovish tint that argues for next month's interest rate rise to be a smaller increment than the previous two. But that failed to shift the financial markets' dial to any great extent.
Last month's policymaker views have already been overtaken to some degree by a fast-changing picture of ebbing inflation and looser financial conditions and markets crave a sharper take from the Fed's annual Jackson Hole symposium next week.
That's left Fed Funds futures pricing in a 60% chance of the next rate hike being 50 basis points and 40% of a 75 bps move, with Wall St stock futures and Treasury bond yields getting little additional impetus. The dollar .DXY nudged higher, with some traders pointing to emphasis in the Fed minutes on how its strength aids the inflation battle by subduing import prices.
Gloomier demand, inflation and policy soundings Europe and China dampened the mood otherwise.
After Britain shocked on Wednesday by becoming the first G7 economy to top 10% inflation in the current cycle, expectations for Bank of England tightening have risen and data showed consumer spending slowing sharply.
European Central Bank board member Isabel Schnabel told Reuters on Thursday the euro zone's inflation picture had failed to improve since the ECB's July rate hike, suggesting she favours another half-point rate rise next month even as recession risks harden.
"The concerns we had in July have not been alleviated," she said in comments that helped lift 2-year German government bond yields to their highest levels since June as July inflation data confirmed earlier flash estimates of a headline 8.9% rate.
Norway's central bank became the latest to lift interest rates by half a percentage point - following a similar move in New Zealand the previous day. . Turkey's central bank decides later on Thursday.
Demand in China continues to be a worry as worsening drought affects power supplies on top of ongoing COVID-19 outbreaks, property sector jitters and Taiwan tensions. Shanghai and Hong Kong stocks fell earlier
Oil prices, whose 25%-plus swoon over the past six weeks encouraged some inflation optimism, pushed back higher on worsening inventory figures.
Key developments that may provide market direction on Thursday: * Philadelphia Fed's August Business Index * US July existing home sales * US weekly jobless claims * Kansas City Fed chief George speaks in Independence, Minneapolis Fed chief Kashkari speaks in Minneapolis * Canada July Producer Price Index * US earnings: Estee Lauder, Kohl's, Applied Materials * Turkey's President Erdogan meets Ukraine President Zelenskiy and U.N. Secretary General Guterres in Lviv * Turkey's central bank latest policy decision
G7 2-yr yields Link
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.