22.08.2019 – Daily report. Now they’ve done it again: the Federal Reserve’s currency guardians, with their ambiguous On the one hand, and on the other, have slowed the propensity to buy. Does the Fed now want a monetary easing or not – and if so, when and to what extent? The Fed’s protocols did not answer these questions. Perhaps clarity will soon come from Jackson Hole. Or before that, plain language from the European Central Bank.
Currency guardians slow Frankfurt down
Once again, German investors hesitated. The DAX fell by 0.2 percent to 11,778 points on Thursday noon. No wonder, since the Fed’s protocols the evening before had not provided any clarity on US monetary policy. According to this, the currency guardians are keeping all options open in their interest rate policy. Particularly paralyzing: The Fed does not agree on how strongly and how quickly the US economy needs interest rate cuts. On the one hand, “a few” members of the Open Market Committee, which is decisive for the interest rate cut, were in favour of a stronger interest rate meeting of half a percentage point or even more. On the other hand, “several” were in favour of not changing the key interest rate at all.
Hopefully, Jerome Powell, head of the Fed, could give concrete indications about the further course this Friday in his speech at the central bank meeting in Jackson Hole. Powell will give the opening speech of the annual monetary policy meeting in the US state of Wyoming. If prices continue to dribble sideways until then, you can look forward to trading CFDs – thanks to the leverage, you can also take advantage of opportunities in the market during periods of indecision. Perhaps the ECB’s minutes in the afternoon will give the market a boost.
Renewed inverse yield curve
In the regular market updates of the stock exchange members further, really moving news were otherwise scarce. The prices on the trading platform hardly moved at all. On the other hand, the recession signal of the inverse yield curve – triggered the evening before by the Oracle of the Federal Reserve – once again caused eyebrows to rise. As CNBC recognized, the yield on two-year US bonds rose briefly above the ten-year curve. Investors therefore increasingly parked money over the long term, which suggests that they do not want to invest in the short term because the outlook is too uncertain.
More courage overseas
Investors in Asia had been rather cautious in the morning. The Chinese CSI-300 gained 0.3 percent to 3,794 points. Japan’s leading index, the Nikkei 225, closed with a gain of 0.1 percent at 20,628 points.
Investors in New York had been bolder. The Dow Jones rose by 0.9 percent to 26,203 points, the S&P 500 gained 0.8 percent to 2,924 points and the Nasdaq 100 gained 0.9 percent to 7,733 points. The previous day, US President Donald Trump had described himself as “chosen” in the customs dispute with China in the usual full-bodied New York style in front of journalists. He had to instigate the trade conflict with China. Trump added that the United States would probably conclude a trade agreement with the People’s Republic.
Crisis in Italy continues
Meanwhile, Europe is waiting for the outcome of the power struggle in Italy. The Machiavellian actors in Rome will prevent a new election in order to deny the Lega a triumph. This should reduce tensions with the EU Commission and initially calm Italian government bonds. But also for an increased reception of illegal immigrants arriving on the Italian coast. And thus for a belated triumph of the Lega in the next elections. These were the last three options for Italy: a possible coalition of the five stars and the social democratic PD. A technocratic transitional government. Or new elections. Not only bond traders and investors in the euro should keep an eye on the matter.
This is what the day brings
The calendar brings some interesting events, you can find the overview as always here: Market Mover
At 1:30pm the ECB will first publish its minutes of the monetary policy meeting on 25 July, which could move stocks, bonds and the euro.
This will be followed at 2:30 pm by the first weekly US applications for unemployment benefits.
Finally, at 3:45pm the purchasing managers’ indices for services and manufacturing in the US will be reported.
At 4:00pm US leading indicators will follow for July.
At the same time, consumer confidence in the Euro-Zone for August is running through the tickers.
Bernstein Bank wishes successful trades!
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