A quiet night before the release of the minutes to the Fed’s last meeting at 4am this morning. Key is a clear divergence of views on the FOMC about whether rates need to be lifted or not and whether inflation is heading back to 2%.
So in the end not much has moved or happened in real terms – but oil is interesting, and the Aussie and Kiwi are lower.
Here’s what I picked up:
International
- Whether a bull or a bear, a hawk or a dove, the minutes from the last FOMC meeting have something for everyone. There is no sense of urgency at all in the minutes “Several suggested that the committee would likely have ample time to react if inflation rose more quickly than they currently anticipated, and they preferred to defer another increase in the federal funds rate until they were more confident that inflation was moving closer to 2 percent on a sustained basis”.
- Interestingly the Fed seems to already be thinking about what’s next – Via Dow Jones, policy makers said their future "framework should have the capacity to supplement conventional policy accommodation with other measures when short-term nominal interest rates are near zero." In other words, Fed officials are already thinking about the possibility that interest rates could return to zero in the future and that they must be prepared to take further steps.
- Ahead of the minutes, St Louis Fed President Bullard, the man who thinks there has been a paradigm shift in the US economy and by default the most dovish FOMC member, repeated his call for only 1 further rate hike this cycle, leaving the Fed Funds rate at 0.625% through to the end of 2018.
- So with a few minutes to go before the close the S&P 500 is up 3 points to 2181, the Nasdaq 100 is flat and the Dow Jones Industrial Average is up 1% to 18569.
- Elsewhere, UK employment was better than expected. I’m still not convinced the UK economy is going to collapse the way many think
Australia
- Lots of volatility within the index again yesterday with big moves in stocks such as Qbe Insurance Group Ltd (AX:QBE) and CSL Ltd (AX:CSL) after their reports. Plenty of other big moves as well but in the end the index was only up 3 points to 5535.
- This morning the SPI 200 is up 6 points suggesting a mildly stronger start to the day. But with the July labour force data out today at 11.30am the focus is likely to be on what that shows and what it could mean for the economy. Especially consumer stocks and retailers.
- The market is looking for an increase of around 11,000 jobs and the unemployment rate of 5.8%. But there are still big issues with this data and the veracity of same – we might get a shock given sample rotation issues.
- But employment is important as is wages growth. The data yesterday showed a rise of just 0.5% on the quarter and 2.1% on the year. Hard for consumption to grow much past that given Australia’s high debt levels.
Forex
- China’s displeasure with Australia is becoming more obvious. Yesterday a Ministry of Commerce official called the decision to block Ausgrid protectionist and said China’s appetite for investment in Australia could suffer as a result.
- I wonder if it’s having any impact in forex markets. Two night ago Gideon Rachman wrote an interesting article saying Australia faces an interesting future balancing China and the US and then this morning the BBC radio business report at 5am had a long article about China’s recent more belligerent tone toward Australia. This kind of thing isn’t a direct impact on forex but it does impact perceptions.
- Anyway the AUD/USD is down 0.64% at 0.7644 this morning after finding support again above 76 cents with a low of 0.7611.
- Elsewhere Euro is a little stronger at 1.1283, USD/JPY is back just above 100 at 100.27, and GBP/USD is at 1.3036.
Commodities
- You have to wonder what the Saudis are up to. They seem to be talking out of both sides of their mouth with Reuters reporting the Saudi’s are pumping at a new all-time high and are set to ramp that up further. At the same time they are also fanning the flames of talk on production cuts. It makes for interesting negotiations I’m sure.
- But WTI is up a little again but just under the important $47 a barrel we’ve been talking about. A big draw of 2.5 million barrels helped keep prices firm in the face of the Reuters report on the Saudis.
- Gold is at $1347, fairly quiet but still above the $1329 support zone.
- Copper lost 1% and is back at $2.15 a pound
- Iron ore dipped around half a per cent in new York futures.
Today's key data and events (all times AEDT)
- Australia - Employment Change s.a. (Jul), Fulltime employment (Jul), Part-time employment (Jul), Participation Rate (Jul), Unemployment Rate s.a. (Jul) (11.30am)
- New Zealand - Participation Rate (Q2) (4.85am)
- China - House Price Index (Jul) (11.30am)
- Japan - Merchandise Trade Balance Total (Jul), Adjusted Merchandise Trade Balance (Jul), Imports (YoY) (Jul), Exports (YoY) (Jul), Foreign investment in Japan stocks (Aug 12), Foreign bond investment (Aug 12) (9.50am)
- Germany - Nil
- EU - Current Account n.s.a (Jun), Current Account s.a (Jun) (6pm); Consumer Price Index - Core (YoY) (Jul), Consumer Price Index (YoY) (Jul), Consumer Price Index (MoM) (Jul), Consumer Price Index - Core (MoM) (Jul) (7pm); ECB Monetary Policy Meeting Accounts (11.30pm)
- UK - Retail Sales ex-Fuel (MoM) (Jul), Retail Sales ex-Fuel (YoY) (Jul), Retail Sales (MoM) (Jul), Retail Sales (YoY) (Jul) (6.30pm)
- Canada - Foreign portfolio investment in Canadian securities (Jun), Canadian portfolio investment in foreign securities (Jun) (10.30pm)
- US - Initial Jobless Claims (Aug 12), Continuing Jobless Claims (Aug 5), Philadelphia Fed Manufacturing Survey (Aug) (10.30pm); CB Leading Indicator (MoM) (Jul) (12am); EIA Natural Gas Storage change (Aug 12) (12.30am)
Have a great day's trading
Greg McKenna
Chief Market Strategist AxiTrader
www.gregmckenna.com.au
Please note: I usually look at 2 or 3 charts each day. These will not always be the same charts and the above is meant to help guide traders thought processes not offer advice.
The information provided here has been produced by third parties and does not reflect the opinion of AxiTrader. AxiTrader has reproduced the information without alteration or verification and does not represent that this material is accurate, current, or complete and it should not be relied upon as such. The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.