Daily digest market movers: Volatility to pick up again
- A slew of US Federal Reserve (Fed) members left a few comments overnight in terms of where they see the Fed policy at the moment:
- President of the Federal Reserve Bank of Chicago Austan Goolsbee said that the Fed is watching markets, though that does not influence the Fed’s policy. Goolsbee also expressed his unease that the Fed would cut so close to US elections.
- Kansas City Fed President Jeffrey Schmid said that it is appropriate to cut when inflation continues to come in low. Schmid also noted that the job market is still in very good shape.
- China’s data this week remained very disappointing after imports surpassed exports, making the Chinese main exporter suddenly an importer for the month of July. More concerns are now at hand, with Consumer Prices rising 0.5% against July last year. The People’s Bank of China (PBoC) might be forced to raise rates in order to tame inflation, while it wants to keep rates low or even lower in order to boost exports.
- Equity markets look a bit two-faced on Friday, with Asian stocks set to close in positive territory, while European indices and US futures are mildly negative.
- The CME Fedwatch Tool shows a 54.5% chance of a 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) in September against a 45.5% chance for only 25 bps. Another 25 bps cut (if September is a 50 bps cut) is expected in November by 51.9%, while a 15.8% chance for a 50 bps cut and 32.3% for no cut are being pencilled in for that meeting.
- The US 10-year benchmark rate trades at 3.97% after popping above 4.00% briefly on Thursday.
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