The financial markets are rather steady in Asian session today. US equities edged higher with DJIA close up 0.13% at 18372.12 while S&P 500 closed up 0.01% at 2152.43, both at new records. Nikkei follows and is trading up 0.62% at the time of writing. But HK HSI follows China lower with HSI flat while CSI 300 is down -0.3%. US 10 year yield pared back some gains and closed at 1.468, down from prior day's 1.513. WTI crude oil is stuck in range around 45 for the momentum as recovery lost steam. Gold is also soft below 1350 with lessened demand of safe haven. Yen and Dollar remain the weakest major currencies. Canada dollar are trading up after BoC stood pat overnight. Theresa May become the second female prime minister in UK yesterday and named her cabinet but reasons were muted. Focus will turn to BoE rate decision today as markets are expecting a pre-emptive cut due to Brexit.
Fed's Beige Book noted that "the outlook was generally positive across broad segments of the economy including retail sales, manufacturing, and real estate." And, "districts reporting on overall growth expect it to remain modest." Labor market conditions "remained stable as employment continued to grow modestly since the previous report and wage pressures remained modest to moderate." And some district reported "strong demand for skilled labor". However, there were "signs of softening" in consumer spending and manufacturing was "mixed".
Philadelphia Fed president Patrick Harker said that inflation will return to target "sometime next year" and " it may be appropriate for up to two additional rate hikes this year and that the funds rate will approach 3.0 percent by the end of 2018." Harker said that "Brexit is low on my list of risks", and "I do not anticipate more than a transitory couple of 10ths of a percentage point slowdown in growth." On the other hand, Dallas Fed president Robert Kaplan urged a "slow, gradual, careful" approach to rate hikes. And, "accommodation should be removed only in a slow and patient manner."
BoC left the policy rate unchanged at 0.50% in yesterday. Policymakers admitted that the result of the June 23 EU referendum would have impact on Canada's economy, estimating that Brexit would trim GDP growth by -0.1% over the next 2.5 years. They also cut outlook for 2016 and 2017. However, they remained optimistic that inflation is on track to return to the 2% target and GDP growth would accelerate in 2017. More in BOC Cut Growth for 2016 and 2017, Brexit Impact Modest.
In UK, Theresa May became the new prime minister yesterday, the second female in history after Margaret Thatcher. May announced her new cabinet which some viewed as tilting to the right. David Davids was named a new position of Secretary of State for Exiting the EU. Philip Hammond, former foreign secretary was named Chancellor of Exchequer, replacing George Osborne. Boris Johnson, former London Mayor and the leader of the "leave" camp, was named Foreign Secretary. Amber Rudd will replace May as the Home Secretary.
BoE rate decision will be the main focus of the day. The central bank is expected to cut interest rate for the first time since 2009 to cushion the impact of Brexit to the economy. There are talks that BoE would further ease monetary policies by reviving the asset purchase program later in August.
On the data front, Australia employment grew less than expected by 7.9k in June while unemployment rate rose to 5.8%. New Zealand Business NZ manufacturing index rose to 57.7 in June. UK RICS house price balance dropped to 16 in June. Swiss will release PPI in European session. US will release jobless claims and PPI later in the day.