A look at the day ahead from Julien Ponthus.
Jackson Hole has loomed over trading all week but there’s a sense among many market watchers that the wait will turn out to be anticlimactic.
“Currency markets are overwhelmingly positioned for a snoozer,” said Cambridge Global Payments strategist Karl Schamotta, nicely capturing the mood in our pre-conference analysis.
Of course, there’s always the possibility that Powell spills the beans and enlightens investors about how and when he plans to taper the Fed’s $120 billion monthly asset purchases but the talk on the street is that he won’t given the risks posed by the delta variant.
The yield on benchmark 10-year Treasury notes is currently at 1.34%, down from a two-week high of 1.375% and the dollar index stands at about 93, back from Thursday’s low of 92.80.
St. Louis Federal Reserve president James Bullard calling for the Fed to start trimming quantitative easing on Thursday did send a few shivers across U.S. treasuries but investors took the view that Fed hawks were just making their voice heard ahead of the big day.
Equity market futures in Europe and Wall Street are broadly flat after an underwhelming session in Asia.
No significant development on the monetary policy front will probably come as a relief to the growing numbers of traders worried that the rally in global stocks is slowly but surely coming to an end, as showed in a Reuters poll of analysts.
While many stock benchmarks are cruising on record highs, the fact that Citi’s global economic surprises index — a gauge of whether data is beating or undershooting forecasts — turned negative this week for the first time since June 2020 is seen as a bad omen.
While it can be argued, as pointed out by Jamie McGeever in his column, that the impact of the Fed on stock markets can be overstated, hundreds of billions of monthly purchases do add up.
Key developments that should provide more direction to markets on Friday:
— China’s slowing industrial profit growth bolsters policy support hopes
— China plans to ban U.S. IPOs for data-heavy tech firms – WSJ
— Australian retail sales plunged in July
— EU set to launch formal probe into Nvidia’s takeover of Arm
— Japan’s industrial output likely fell in July (poll)
— Japan, CPI Aug
— France consumer confidence Aug
— US PCE index, July
— University of Michigan sentiment survey, final Aug
— Moody’s reviews France rating
Graphic: Balance sheet: https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnnzeyvq/Pasted%20image%201630045063119.png
(Reporting by Julien Ponthus)