With US economy humming, a quarter point will do
A look at the day ahead in U.S. and global markets from Mike Dolan
The U.S. economy is doing just fine and markets now accept a quarter-point rate cut from the Federal Reserve next month will be enough to get the easing cycle going as disinflation resumes.
That was the basic conclusion from a torrent of macro economic updates on Thursday that showed American shoppers in fine fettle, WalMart WMT.N upping forecasts and jobless claims ticking lower.
It's not all clear skies and sunshine - some weakness persists in manufacturing and housing. But as inflation is returning to target, it allows the Fed to start taking its foot off the brake in September and underscore the decent expansion.
Despite the retail spending spree, the Atlanta Fed's 'GDPNow' real time estimate cooled to 2.4% growth for the current quarter from 2.9% previously. And U.S. and global economic surprise indexes remain in negative territory overall.
Overall, the updates have been enough to bat away thoughts of recession without removing Fed easing hopes.
The debate about whether the first cut will be a quarter or a half point seems settled for now and futures price just 30 basis points of cuts for next month - and just 61bps over the remainder of the year. There had been more than 100bps of 2024 cuts assumed at the start of the week.
The Fed's annual Jackson Hole symposium late next week now colors in the central bank's thinking and earnings from AI-bellwether Nvidia NVDA.O on Aug 28 kick the tyres of the artificial intelligence theme.
Fed chair Jerome Powell speaks next Friday as Jackson Hole event gets underway.
But it's clear already that most Fed officials are prepared for easing to start next month, if only to prevent renewed disinflation lifting the real inflation-adjusted policy rate even further from 17-year highs.
"It now appears the balance of risks on inflation and unemployment has shifted ... the time may be nearing when an adjustment to moderately restrictive policy may be appropriate," St. Louis Fed President Alberto Musalem said on Thursday.
Srugging off its near heart attack early last week .VIX, Wall St seems to like the current constellation.
After Thursday's roaring stock rally .SPX, .IXIC, S&P500 futures Esc1 are higher again on Friday and the index looks set to record its best week of the year with gains of almost 4%.
And Treasuries were only mildly put off by the reset of Fed expectations - with two-year yields US2YT=RR returned back above 4% on Thursday and holding there early today. The dollar index .DXY firmed up in tandem.
Perhaps reflecting more sustainable times ahead, the negative daily correlation between stocks and bonds that's returned since Aug 1 has been sustained just as the VIX volatility index returns just below its historic median.
The overseas market mood was similarly ebullient, with Japan's Nikkei .N225 surging again on Friday - gaining more than 3% to record a spectacular weekly bounceback from Aug 5's yen-related turbulence that now ranks as its best week in more than four years.
Thursday's second-quarter GDP beat from Japan has helped and the yen JPY= easing back a bit.
Despite a more mixed economic picture in Europe - sapped in part by China's ongoing economic stumble - European stocks .STOXX also caught Wall Street's slipstream on Friday to stay on track for their best week in three months.
Chinese stocks were firmer too after Thursday's interview with central bank governor Pan Gongsheng indicated the bank will will stick to a supportive monetary policy.
Sterling GBP= was an outperformer on currency markets after data showed British retail sales rebounded 0.5% in July, in line with expectations.
Next up stateside on Friday is July's housing starts report, with the corporate earnings diary thinning out.
In company news, Applied Materials AMAT.O forecast fourth-quarter revenue slightly above estimates after the bell on Thursday, anticipating a surge in AI-fueled demand for its chip-making equipment.
But shares of the Santa Clara, California-based company were down 2.8% in extended trading after having closed about 5% higher on Thursday.
Key developments that should provide more direction to U.S. markets later on Friday:
* US July housing starts and permits, University of Michigan August household survey
* Chicago Federal Reserve President Austan Goolsbee speaks
* US corporate earnings: Campbell Soup
US retail sales surge in July https://reut.rs/4fNpKeg
US jobless claims fall back https://reut.rs/4drmFyM
US industrial production falls, slack increases https://reut.rs/3yBSc1T
Atlanta Fed's 'GDPNow' estimate cools to 2.4% https://tmsnrt.rs/3SQvH00
U.S. retailers' share of food and grocery market over the years https://reut.rs/3SThf7A
By Mike Dolan, editing by Philippa Fletcher
mike.dolan@thomsonreuters.com
Actifs liés
Dernières actualités
Avertissement : Les entités de XM Group proposent à notre plateforme de trading en ligne un service d'exécution uniquement, autorisant une personne à consulter et/ou à utiliser le contenu disponible sur ou via le site internet, qui n'a pas pour but de modifier ou d'élargir cette situation. De tels accès et utilisation sont toujours soumis aux : (i) Conditions générales ; (ii) Avertissements sur les risques et (iii) Avertissement complet. Un tel contenu n'est par conséquent fourni que pour information générale. En particulier, sachez que les contenus de notre plateforme de trading en ligne ne sont ni une sollicitation ni une offre de participation à toute transaction sur les marchés financiers. Le trading sur les marchés financiers implique un niveau significatif de risques pour votre capital.
Tout le matériel publié dans notre Centre de trading en ligne est destiné à des fins de formation / d'information uniquement et ne contient pas – et ne doit pas être considéré comme contenant – des conseils et recommandations en matière de finance, de fiscalité des investissements ou de trading, ou un enregistrement de nos prix de trading ou une offre, une sollicitation, une transaction à propos de tout instrument financier ou bien des promotions financières non sollicitées à votre égard.
Tout contenu tiers, de même que le contenu préparé par XM, tels que les opinions, actualités, études, analyses, prix, autres informations ou liens vers des sites tiers contenus sur ce site internet sont fournis "tels quels", comme commentaires généraux sur le marché et ne constituent pas des conseils en investissement. Dans la mesure où tout contenu est considéré comme de la recherche en investissement, vous devez noter et accepter que le contenu n'a pas été conçu ni préparé conformément aux exigences légales visant à promouvoir l'indépendance de la recherche en investissement et, en tant que tel, il serait considéré comme une communication marketing selon les lois et réglementations applicables. Veuillez vous assurer que vous avez lu et compris notre Avis sur la recherche en investissement non indépendante et notre avertissement sur les risques concernant les informations susdites, qui peuvent consultés ici.
